The Jones County Board of Supervisors have completed the $3.65 million sale of Recovery Zone Economic Development Bonds (RZEDB), making Jones County the first municipal debt issuer to take advantage of the Recovery Zone Economic Development allowance.

“This will have a major impact on the county,” said Board President Andy Dial. “This means we will be able to get and won’t have to pay interest on the $3 million we are borrowing to make improvements in the county."

According to Butler Snow, the county will have to pay interest. The Treasury Department is subsidizing the interest payment with a 45 percent reimbursement for interest paid. The total bond issue was $8,935,000, of which $3,265,00 was issued as RZEDBs.

“The money will be used on infrastructure projects such as roads, bridges and other.”

RZEDBs, the $10 billion federally subsidized program that permits local governments to sell taxable bonds instead of tax-exempt bonds, was created by the American Recovery and Reinvestment Act of 2009 to aid areas of the U.S. affected during the recession. The taxable securities are eligible for a 45 percent rebate on interest costs from the U.S. Treasury Department. The $3.65 million of RZEDBs sold by Jones County represent the county’s allocated capacity from the federal government for this type of bond. It also includes the sale of $5.67 million of bank qualified tax-exempt bonds.

Butler, Snow, O’Mara, Stevens & Cannada, PLLC, (Butler Snow) and Morgan Keegan & Company, Inc. and Government Consultants, Inc.. worked with county officials in the selling of the bonds. Butler Snow, which has represented Jones County on various opportunities since 2005, acted as bond counsel for Jones County. Morgan Keegan served as underwriter and Government Consultants, Inc., served as financial advisor.

According to the 2009 The Bond Buyer’s Municipal Marketplace directory, Butler Snow is the only Mississippi firm listed in the Top 100 Bond Counsel in 2008 for both Long-term Issues (principal amount of long-term issues with a final maturity of 13 months or longer, excluding private placements, short-term notes and preliminary issues) and Short-term Issues (principal amount of short-term issues with a final maturity of less than 13 months, excluding private placements, long-term bonds and preliminary issues).

Morgan Keegan, based in Memphis, is one of the largest full-service brokerage and investment firms in the nation. The firm’s staff of more than 180 public finance professionals provides underwriting services through 28 banking offices in 14 states.

In the first half of 2009, Morgan Keegan was the country’s eighth largest municipal bond underwriter in the U.S., according to Thomson Reuters, one of the country’s leading municipal bond information services. Morgan Keegan is also ranked No. 1 nationally as an underwriter of Build America Bonds competitive issues and the top underwriter of municipal bonds in Mississippi.

According to Gavin Murrey, managing director of Morgan Keegan’s public finance office in Memphis, “The Recovery Zone Bonds provided the opportunity for the county to finance needed improvements. They were able to utilize this unique program to benefit the citizens of Jones County.”

“The Recovery Zone Economic Development Bond will provide Jones County with significant opportunities, and may allow them to consider projects that might not otherwise be attainable,” said Butler Snow Chairman Don Clark. “We hope this transaction will serve as a prime example for other counties in Mississippi on ways to benefit from The American Recovery and Reinvestment Act.”

Lindsey Carter, associate vice president at Morgan Keegan and head of the transaction’s underwriting team, noted that several factors led to the county’s ability to attract investors. Among these factors, she cited the county’s insurance against default by Assured Guaranty Corp., general obligation backing of the county and the county’s A+ ratings upgrade from Standard & Poor’s.

“The RZEDB program allows issuers to offer investors attractive yields and, in the case of Jones County, reduced risks provided by bond insurance and the county’s strong municipal credit,” Carter said. “The successful completion of the offering was also helped by the firm’s distribution capabilities and, by strong retail participation.

“With this new category of bonds, Butler Snow’s detailed advance work was critical. Their due diligence paved the way for a successful transaction.”

Butler Snow has served as bond counsel to over two-thirds of the counties and a number of communities in the state. The firm has also served as bond counsel to a number of school districts, utility and economic development districts.

“With our vast bond experience as a firm as well as our extensive knowledge of the American Recovery and Reinvestment Act, we had the expertise to help Jones County adapt the RZEDB structure quickly and take advantage of the opportunity,” said Attorney Michael Russ, a member of Butler Snow’s Stimulus Response Team. “Working with a true partner like Morgan Keegan strengthened our ability to provide a seamless and thorough counseling process.”

Jones County Administrator Charles Miller said Butler Snow and Morgan Keegan provided valuable insight into the RZEDB program. “Jones County is grateful for the exceptional counsel Butler Snow and Morgan Keegan provided on our bond issue,” he said. “Both firms were very knowledgeable on the Build America Bonds and took the time to explain every step of the process to the County.”

According to the Treasury Department, Build America Bonds are a new financing tool for state and local governments. The bonds, which allow a new direct federal payment subsidy, are taxable bonds issued by state and local governments that will give them access to the conventional corporate debt markets.

At the election of the state and local governments, the Department will make a direct payment to the state or local government issuer in an amount equal to 35 percent of the interest payment on the Build America Bonds. As a result of this federal subsidy payment, state and local governments have lower net borrowing costs and are able to reach more sources of borrowing than with more traditional tax-exempt or tax credit bonds.

While acknowledging that the county is the first in the state to take advantage of the program, Miller said the county didn’t do anything in particular to obtain such an honor.

“It so happened to be the timing of the program worked perfectly for us,” he said. “We were in the process of looking at bonds the day the program started.

“Butler Snow started looking at things to see if we qualified and when they discovered we were, we started working from there,” he continued. “The whole process took us about four or five months. The great thing about it all is we are saving a good deal of money on interest.”

According to Butler Snow, Jones County did not issue pure Build America Bonds, per se. The county issued Recovery Zone Economic Development Bonds which are a specialized form of Build America Bonds due to the fact that the projects, which can use such bonds are limited to certain projects and certain dollar amounts. Most importantly, they have a 45 percent subsidy as opposed to a 35 subsidy.