Maverick County Scheduled to Make $1.075 Million Payment on August 1st on Public Facility Corporation Debt

By: Jose G. Landa, Eagle Pass Business Journal, Inc. Copyright 2015

Maverick County is scheduled to make a payment of $1,075,759.38 for its interest debt under the Series 2007 Bonds in accordance to the Maverick County Public Facility Corporation’s agreement with its bond holders issued for the construction of the 625 Bed Maverick County Detention Center Project at the Radar Base on Highway 131.

It is unknown if Maverick County will be able to make this payment on August 1, 2015 or whether its current negotiations with the $42 Million Bond Holders and Trustees will modify the terms and dates of the payments owed by the Maverick County Public Facility Corporation.

Under the terms of the agreement, the Series 2007 Bonds will be dated, as originally issued, as of their date of delivery, will mature on the dates and in the amounts, and will bear interest at the annual rates, as shown on the inside contents of the Series 2007 Bonds, which accrues commencing on their date of delivery, will be payable semi-annually on February 1st and August 1st of each year to the date of maturity or redemption, whichever is earlier, commencing on February 1, 2008. The principal of the Series 2007 Bonds will be payable upon presentation and surrender thereof at the operations center of the Trustee in St. Paul, Minnesota. Interest on the Series 2007 Bonds will be payable by check or draft of the Trustee mailed to the persons appearing as registered owners at the addresses shown on the registration records maintained by the Trustee as of the close of business on the fifteenth day of the month, whether or not a business day, immediately preceding each Interest Payment Date, or by wire transfer to owners of at least $1,000,000 in aggregate principal amount of Series 2007 Bonds, pursuant to a written agreement between such owner and the Trustee, such request to be made at least five business days prior to the Interest Payment Date.

Under the agreement it is stated that on August 1, 2016 there will be an interest and debt service payment of $ 1,075,759.38.

Debt Service is the money that is required for a particular time period to cover the repayment of interest and principal on a debt. Debt service is often calculated on a yearly basis.

Under the Series 2007 bond agreement, the County will then have to take care of debt service on February 1, 2017 in the principal amount of $1,590,000.00 and $ 1,075,759.38 interest accrued for a total of $ 2,665,759.38, as per the agreement.

These type of payments will continue until February 1, 2029 and will see its principal amount paid increased at a certain percentage per year but its interest payments will decrease.

On February 2, 2015, the Trustee, UMB Bank, N.A., for the $42 Million Bondholders notified the Maverick County Public Facility Corporation and Maverick County Judge David R. Saucedo that Maverick County failed to make a scheduled $1,415,000 principal payment of the Bonds on February 1, 2015, but did make the February 1, 2015 interest payment.

Consequently, the Trustee advised the Maverick County Public Facility Corporation and County Judge Saucedo that there are “several events of default have occurred and are continuing under the Indenture, including the Event Default caused by having insufficient funds to make the February 1, 2015 Mandatory Sinking Fund Payment. Under the terms of the Lease,…all Project Revenues have been pledged as security for the Bonds and the County is obligated to cause all Project Revenues to be delivered directly to the Trustee. The County continues to intercept Project Revenues, which constitutes a violation of the County’s obligations under the Lease….The County has then remitted funds that it requisitions back for payment of operating expenses. Under the terms of the Lease, all Project Revenues must be delivered directly to the Trustee and are to be used to pay Rental Payment Deposits first, prior to using such revenues to pay Project operating costs and expenses. Section 12.1 of the Lease provides that failure by the County to make a Rental Payment, Rental Payment Deposit or any other payment required to be paid under the Lease constitutes an Even of Default. The County’s failure to deliver intercepted funds to the Trustee for application towards the Rental Payment Deposit has caused an Event of Default under Section 12.1(a) of the Lease, which also constitutes an Event of Default under Section 7.01(c) of the Indenture.”

The Trustee, UMB Bank, N.A., further advised Maverick County that “the County had not provided the Trustee with various deliverables required under the Lease, including annual audits of the Project’s operations during the 2013 Fiscal Year as required by Section 2.1(1) of the Lease. The failure to timely deliver such remaining overdue items to the Trustee constitutes additional Events of Default under Section 12.1(b) of the Lease, and also under Section 7.01(c) of the Indenture.”

It is unknown if Maverick County will be able to make its scheduled debt payment of $1,075,759.38.for the month of August 2015 and also the principal amount payment of $1,415,000 owed from its February,1, 2015 obligation to the bondholders due to the lack of open and transparent information to taxpayers from both the Maverick County Commissioners Court and the Maverick County Public Facility Corporation.

Maverick County was presented with the Maverick County Public Facility Corporation’s 2013 audits by Milo Martinez of Martinez, Rosario and Company LLP on April, 2015, two months after the Trustee, UMB Bank, N.A., had issued out its demand letter and notice of default.

Maverick County Commissioners Court and the Maverick County Public Facility Corporation have completely changed all the professional advisors to assist it with the current negotiations with the Bondholders and Trustees, including new Financial Advisor First Southwest Capital for former Southwestern Capital Markets, Inc., Bond Counsel William “Bill” Avila for former Juan “Johnny” Aguilera, Auditing Firm Beyer and Company, CPA, for former Martinez Rosario and Company LLP, and County Auditor Sandra Watkins for former County Auditor Fidencio Ortiz.

Maverick County Public Facility Corporation and Maverick County’s ongoing negotiations and debt payments to the Bondholders and the Trustees of the Maverick County Detention Center are critical that they be successful; otherwise, Maverick County taxpayers may be hit with extraordinary potential financial liabilities.

Unfortunately, Maverick County Commissioners Court and the Maverick County Public Facility Corporation have been extremely secretive and have failed to provide open and transparent public information regarding the County’s financial situation regarding the $42 Million Maverick County Detention Center. Maverick County taxpayers deserve open and transparent public government according to the Texas Public Information Act and Texas Open Meetings Act.