TMBF, RSA Advisors partner for 30-year, long-term fixed rate loan program

By KATE COIL

TT&C Assistant Editor

Tennessee municipalities now have the option for a 30-year, long-term fixed rate loan as part of a new partnership program between the Tennessee Municipal Bond Fund (TMBF) and RSA Advisors.  

TMBF was created in 1985 by the Tennessee Municipal League for the purpose of providing an alternative means for governmental entities to finance capital projects at a lower cost. TMBF operates a variety of loan programs and has assisted cities and counties on over 1,700 loans totaling more than $5.1 billion over its 39 year history.  

Based in Lexington, Ky., RSA has provided over 30 years of public finance services throughout the region and is nationally recognized for many of its innovative financing structures. 

TMBF President/CEO Wade Morrell said the partnership between the Bond Fund and RSA has been more than a decade in the making. 

“In the early 2010s, RSA reached out to TMBF about joining this newly created program in Kentucky,” Morrell said. “It was not the best time to explore the partnership, so we agreed to keep in touch. In 2021, TMBF and RSA had a conversation at the NLC Public Finance Consortium conference about taking another stab at a partnership. Over the next two and a half years we hashed out legal documents and responsibilities. Lots of behind-the-scenes work went into merging an existing, out-of-state program with our existing programs.” 

Joe LaKofka, managing director and partner with RSA, said both the Bond Fund and RSA work toward the same goal: helping municipalities.  

“RSA is pleased to partner with TMBF to offer another financing solutions for its clients,” LaKofka said. “The TMBF team has put a lot of time and effort into developing this fixed rate program, which compliments their existing financing programs nicely.” 

The new partnership presents new opportunities for the Bond Fund and Tennessee municipalities. 

“TMBF was created to help our cities and towns with the borrowing process and save them money on their borrowings,” Morrell said. “We have always sought to deliver the best value and opportunities for our cities and towns. On many occasions over the past 39 years, cities have requested a long-term fixed rate loan option. Until now, the Bond Fund has never been able to offer this type of loan. Under this new program, we can deliver a long-term fixed rate program that can provide a true fixed interest rate for up to 30 years.” 

With the benefit of the existing Kentucky pool’s backing, Morrell said all new issues through the program will be rated AA- with hopes for an upgrade in the future. One such municipality already benefiting from the program is the Town of Chapel Hill. 

Danny Bingham, Town Administrator for Chapel Hill, said continued growth in the area has created a need for a new SVR sewer plant for the Town as well as work on the Town’s water treatment plant to increase capacity and storage. The total cost of these projects came in at around $16 million - $12 million for the sewer plant alone. Officials knew the projects needed to be funded. 

“We knew we have to be smart about development around here,” Bingham said. “What got us directed to this program was that we had been working with Kevin [Krushenski] on several things. We knew him, had that relationship with him, and we had good luck with what we had worked on before. We told him about this project, and he told us about this program. It worked for us. For a small municipality, that type of program was ideal for us. One reason I liked it was because it was quickly able to implement and get the funds.” 

Chapel Hill Town Recorder/Treasurer Phillip Dye said the Town had looked into a USDA loan but found the RSA program through TMBF had better terms for the Town. 

“It also offered us the opportunity to extend the loan out to help us be able to afford it more without having to go through all the hoops of going through a USDA loan,” Dye said. “That was a major part of our decision. Small towns like ours often run into the issue of having not enough revenue and too many expenses. Without having to raise taxes to get more money, this allows us to put something into our budgets where we can afford it without having to send the costs on to the taxpayer. It helps us to get to the point where we can continue to grow. Without the sewer and water, we can’t go anywhere else.” 

Dye said TMBF made the program extremely easy to use. 

 “They went by our schedule, came to our meetings at night, were very informative, and were always available to answer our questions,” Dye said. “I can’t say enough good about the whole TMBF team.” 

The ease of access means Chapel Hill is already breaking ground on the sewer plant and an engineer is already working on the water plant. Bingham said with rising construction costs, it means the quicker projects can get done, the easier it is on municipal budgets.  

“They made it very easy for us to get the numbers, crunch the numbers, and see if it made sense in our case to do it like this,” he said. “They got the credit rating and all we had to do was sign the papers and say yes. It was a very easy process. They educated our board members on this and laid out all the options for them. With our situation, it was a no-brainer. The bottom line is it makes it very affordable for a small town to be able to look at some of these larger projects.” 

Bingham said the new sewer plant and improved water plant will not only accommodate 1,100 new housing starts in the area, it will also position Chapel Hill for more residential, industrial, and retail growth.  

About the first loan with Chapel Hill, Morrell added, "we are very thankful for our relationship with Chapel Hill. They were the perfect partner for launching this new program. We enjoy working with all the Town’s leadership. They are personable, very hard working, and diligent. This is truly a town that is on the cusp of great things.” 

“This new program could be beneficial for many communities that either don’t have existing credit ratings or fall below the AA level by delivering better interest rates,” Morrell said. “In addition, by leveraging an existing program’s infrastructure, this new program’s funding timeline can be achieved much faster than many other long-term fixed rate options. TMBF believes this program could be very beneficial to the TML membership because the recent interest rate and inflation increases have together made some necessary projects unaffordable under a normal 20- or 25-year payback. The extra five years can go a long way toward making a much-needed project fit in the budget and help our members keep taxes or utility rates as low as possible.” 

In addition to serving as the municipal advisor on these loans, RSA will also help with timing, structure, and municipal financial advice to municipalities participating in the program. Morrell said the friendly faces at TMBF will also still be there to help municipalities, whether they opt to participate in the new program or not. 

“The process of getting a loan from this program will be very similar to our current programs,” he said. “TMBF’s team of myself, Linda Mooningham, Justin Hanson, Kevin Krushenski, and Steve Queener will continue to visit your communities to discuss your needs and let you know each of the options we have available. If you have a need or want to see how this new program would work for your upcoming project then TMBF and RSA will visit with your city leadership and walk through estimates, the process and expectations. We will still be with you every step of the way because we were created to make the borrowing process easier for you. We are very excited to be able to offer our membership a long-term fixed rate program and we look forward to being able to partner with you on your upcoming project.” 

Officials interested in learning more about this new program can reach out to TMBF at 615-255-1561.