NORMAN — A report issued by the Internal Revenue Service shows that the Cleveland County Justice Authority issued too many bonds to pay for its new jail in Norman, but chalked the error up to a bad economy at the time the project went out to bid.
The report also reveals that the Cleveland County Justice Authority unintentionally misrepresented how much the bonds would pay off for investors. But again, a bad economy and puny interest rates allowed the county to escape any IRS penalties.
The new jail, known formally as the F. DeWayne Beggs Detention Center, opened in February 2012 and more than tripled inmate capacity for Cleveland County. The state-of-the-art facility cost $36 million to build due to the economic collapse in late 2008.
The county issued bonds totaling $52 million to fund the project and was in the process of paying the money back when the IRS announced that it would perform what was described as “a routine audit” by Cleveland County Assistant District Attorney Carol Dillingham.
Cleveland County residents in 2008 approved a quarter-cent tax to fund repayment of the bond, and the money has been flowing in since then, oftentimes exceeding projections.
Dillingham described the IRS report in a positive manner, saying the federal agency essentially gave the justice authority a “clean bill of health” as far as its bonds are concerned.
“Because the IRS has the ability to use hindsight in its review, it can determine at any time that more bonds were issued than were necessary for any given project,” Dillingham said in a statement.
“In this case, the final cost of the jail was less than estimated ... the IRS did not find that the costs projected by professional cost estimators were incorrect or that the authority's reliance on professional estimates was misplaced or in any way improper.”
The IRS report, released to the authority last week, also shows that the county “miscalculated” how much the bonds would pay off for investors.
The document does not reveal the specifics of the miscalculation, but Dillingham commented that “the county will take the yield (percentage rate) ... to six decimal places rather than the four used previously” as it makes future calculations.
“Despite the economic recession of 2008-2009, the authority invested the bonds at the most attractive rates available, yet the rates were historically low,” Dillingham said.
The IRS report indicates that the bonds issued by the Cleveland County Justice Authority will retain their tax-exempt status. It also states that the funds will have “limitations” as to their use in the future.
Dillingham described the IRS findings as a “major accomplishment for Cleveland County and its residents.”
“We now have a modern, well-equipped, efficient county jail that came in well below budget,” she said. “The county has retired $13 million of the bond debt, years ahead of schedule, and could terminate the tax well before its 20-year term.”