‘Unanswered questions’ answered regarding Two Rivers detention facility

Thursday, November 1, 2018
Article Image Alt Text

What follows is a partial response to Mary Slattery’s “unanswered questions,” published in the Big Horn County News on Oct. 11.

First: Who owns the land and who owns the building?

Two Rivers Authority is the nominal owner of the facility, which includes the property. The debt owed to the bondholders is essentially a mortgage.

Second: Have the bondholders given Two Rivers in writing the authority to negotiate with anyone regarding the sale or lease of this property? Has a firm price ever been offered?

The bondholders have provided an asking price at a discount to the book value of the facility and the debt owed. The county has offered a lesser amount. No agreement could be reached regarding a “firm” price. The only “written authority” required under the indenture is that any contractual agreement entered into by Two Rivers Authority in regard to the detention facility must be approved by the U.S. Bank Trustee.

Third: Are they willing to have a certified structural engineer, water, electrical, fire sprinklers, and heating and cooling system inspected?

Yes. The facility underwent all the appropriate inspections during construction and received a Certificate of Occupancy in 2007.

Fourth: How much money is actually owed to the bondholders and how much money has been put into this this project by the city?

Two Rivers Authority’s total accrued debt as of June 30 is approximately $46 million, most of which is principal and interest owed to bondholders. In 2011, Two Rivers Authority attempted to recover approximately $530,000 from the consulting firm that promoted the project with the promise that construction of the facility poses “no financial burden and/or risk to the Two Rivers Authority and the City of Hardin.” Reportedly, the lead consultant promised personally to find a source of inmates for the facility. Since Jan. 1, 2010, the city has provided approximately $183,500 in direct funding to Two Rivers Authority.

Fifth: How much are the utilities now on the facility? In 2012 they were said to be $10,000 a month unoccupied.

The utilities vary by season. Since 2010, we have taken steps to minimize expenses for the unoccupied facility. The original thermostat control required certain knowledge that was not provided to Two Rivers Authority until some later point, after which we were able to modulate the environmental controls and limit the utility expense. Recent data for the facility indicates an average operating expense of less than $5,000 per month.

Sixth: In the Legislative Audit Division document for the State of Montana, dated Nov. 27, 2007, beginning November 2008, Two Rivers would owe $211,252 a month. How has this been addressed?

Apparently, this is a reference to the maximum annual debt service on the facility amortized over a monthly basis. Beginning in 2007, five interest payments of approximately $960,000 each were made from the U.S. Bank Reserve Fund for the facility. The trustee suspended those payments in 2009, at which time the reserve fund had approximately $915,000, which was used going forward for maintenance, utilities and insurance. As of 2018, the reserve fund was effectively depleted.

Two Rivers Authority receives funding advances from the bondholders on an as-needed basis.

The balance of Ms. Slattery’s questions have been answered in the Two Rivers Authority response posted on Big Horn County’s Facebook page.

Jeffrey S. McDowell, Executive Director
Two Rivers Authority