Shaving an interest rate will save Baxter residents thousands for North Forestview project assessments.
A Monday, Nov. 23, bond sale to finance the North Forestview project as well as the commercial areas of Excelsior Road and Fairview Road and Golf Course Drive. In a report Monday night to the city council via Zoom, Jeremy Vacinek, city finance director, said the city received six competitive bids for the 15-year bonds. With restructuring plus prepaid special assessments, the bond was able to be lowered to a little over $5.7 million. Vacinek said that was important because it reduced the amount of debt on the city’s balance sheet and shaved off a little bit more of the true interest cost.
There was a bit of a runup before the election as cities put up their bond sales, Vacinek said. And now the short holiday week likely worked in Baxter’s favor with fewer going to the market this week.
“In the end we were able to achieve a true interest cost of a little over 1.1%, that’s the lowest I’ve seen in my 20 years,” Vacinek said. “I think that’s pretty remarkable on a 15-year issue.”
That means the special assessment interest rate was also reduced to 2.61%.
During the public hearings on the project last spring, predictions were for an interest rate of 4.5% and for a 20 year term, which was later modified to a 15-year term. The lower interest rate translates to almost a $200 annual savings on those payments for the $16,200 Forestview assessment so the total savings over the life of that repayment is close to $4,000.
Vacinek also reported Moody’s reaffirmed the city’s AA 3 rating noting the city’s strong reserves are offsetting the debt per capita based on the city’s smaller population and debt outstanding, even though a lot of the debt is assessment based. Vacinek noted Moody’s takes the debt into account in case taxpayers did not pay their assessments..
“Still very, overall, really good for a city our size to have a AA3 rating and that’s just something that we’ll have to keep an eye on a little bit as we move forward,” Vacinek said. “But overall good results, I think, good savings to the city as well as to the property owners on there on our special assessments.”
Mayor Darrel Olson asked if there were any adjustments that needed to be made for the people who pre-paid the assessments, noting the ones who did were likely doing so in order to not pay any interest.
Vacinek said people both pre-paid so not to pay interest and the city fixed the interest rate through the end of 2020 at 2.5% so there wouldn’t be any adjustments.
“Great news,” Olson said, adding it was nice for people to get a little good news like this before the holidays.
“It makes you think we should have had larger projects,” council member Todd Holman said.
“I was worried you were going to say that,” Vacinek said, adding the city still has to pay those bonds back but interest rates are historically low right now.
Olson joked that Holman might just want to mute himself, getting a laugh from Holman.
The council adopted the resolution providing for the sale of the general obligation bonds and set the final special assessment interest rate on the 2020 improvements.
Council member Mark Cross was absent.