CalFirst Bank, which said it would loan Manassas Park money to lease-purchase new school buses, suddenly decided against extending the loan, and school officials believe it is—at least in part—because of the .
School division administrators had to negotiate a new agreement with Alliance Bank of Manassas Park to borrow no more than $255,732 for three new school buses, Superintendent Dr. Bruce McDade told the Manassas Park School Board during a work session Monday evening.
The school board, in turn, voted Monday to approve the lease-purchase agreement with Alliance Bank, the only bank or bank branch in the entire city.
School board administrators said the decision to go with Alliance Bank was last minute because they found out just hours before Monday’s meeting that CalFirst Bank backed out.
“As a result of them backing out we had to go to our next choice,” McDade told the board. “… They are very much aware of the city’s bond (rating) and downgrade and that’s why we are having difficulty.”
Manassas Park's credit rating was and again by
Another bank, SunTrust, did not bid for the loan because of exposure levels; which is linked to how much of a risk of default the bank is facing if it should decide to lend money to the city.
McDade told the board he met a very nice SunTrust banker at a conference he attended recently, but the banker’s mood shifted after McDade told him he was affiliated with Manassas Park.
“He was very friendly until he found out I worked in Manassas Park where the city’s bond rating dropped five notches, and then I didn’t see much of him for the rest of the conference,” he said. “I called him and he did not return my phone call — that’s the reality of what we are dealing with here with the finances in the city.”
School board Chairman Michael Wine said even though the city will end up paying more money by borrowing the money from Alliance Bank, at least they are “keeping it in the Park.”
The city would have paid $4,484.60 per month if it had borrowed from CalFirst, according to school division data. The monthly payments to Alliance Bank are $4,825.98.
The loan is expected to be paid in full in June of 2017.
School administrators said they sent out competitive quotes for the loan by phone and by email to CalFirst, Alliance Bank, SunTrust and other banks. BB&T didn’t respond and Liberty Commerical Credit didn’t bid.
Another bank, Tetra Financial, agreed to issue a loan with monthly installments of $4,539.24, but that loan didn’t have a non-appropriation clause. This clause protects the school division from being directly held accountable if the city should default on the loan.
By law, the city and the school division’s financial accountings are separate, but the city does pay the school division’s debt service.
The next school board meeting is June 18 at 7 p.m. in the school boarding meeting room on the second floor of Manassas Park City Hall.
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