County may issue remaining bonds for LEC project next week

By Bob Steenson, bsteenson@charlescitypress.com

Floyd County supervisors held a lengthy discussion on risk management at their meeting Monday morning, regarding financing for the law enforcement center project.

Meeting with their bond representative, supervisors discussed whether it would be a good idea to lock in low interest rates now by issuing the second half of the general obligation bonds needed for the county jail and sheriff’s office project, even though that money likely won’t be needed until the end of this year.

They also discussed the amount of “premium” they should get to help pay for the project, which came in $4 million over original estimates.

County voters in May 2018 approved issuing up to $13.5 million in general obligation bonds to finance what was expected to be the total cost of the project. After bids were received the total cost was closer to $17.5 million.

At the time they approved issuing the bonds, county residents were told the impact in property taxes would be about $1.08 per $1,000 of assessed taxable valuation.

Monday morning, Jeff Heil, senior vice president of public finance for Northland Securities, presented options to the county board that would pay for the project while locking in the taxpayer impact at $1.08 per $1,000 or less.

The latest county property valuations were released recently, and “with the new valuations, things look pretty good as far as some options,” Heil said.

With current historically low interest rates, “we’ve picked a good time to go to market,” he said.

County Auditor Gloria Carr asked what might happen with the things going on in the news currently, such as increased tension in the Middle East.

Heil said as of Monday morning buyers didn’t appear to be scared, and the interest rate was bouncing up and down within a narrow range, but that could change quickly.

The supervisors are counting on raising up to an additional $2 million in funding through premiums on the bonds, where coupons are issued at a higher percentage rate in return for more cash up front.

The first part of the bond package, for $6.01 million, was issued last year. The bonds were split up to avoid issuing more than $10 million in a single year and thereby qualify for a lower interest rate based on the county’s bond rating.

Heil said he would put together a package this week to issue the remaining $7.49 million in bonds, with up to $2 million in premium and a coupon call date of up to about the year 2034, with a required levy rate of $1.08 per $1,000 or less to pay off the bonds.

“We’ll probably release that Thursday to the buyers and the banks so we get preliminary orders over the weekend, then on Monday we’ll do firm orders, so then on Tuesday morning we’ll have a firm contract” for the board to approve and sign at its regular meeting, Heil said.

He said the bonds would be offered to local banks first, but with the 5% interest rate coupons that would be offered to generate the $2 million premium, large investors such as big retirement funds would likely be the more aggressive bidders.

The supervisors know they will have to dip into the county’s general fund reserves to help pay for the project, and they agreed on a bond package including the $2 million premium to help avoid having to dip too deeply.

That was also part of the reason they agreed to go ahead and issue the bonds now, barring any major market changes this week.

“I’ve always said my big concern is how much we pull from the general fund and getting us into a situation where we’ve really put ourselves at risk of that,” said Supervisor Linda Tjaden.

Supervisor Roy Schwickerath said, “Right now I have to believe our interest rates, historically, are about as low as they can get. I’m not a gambler. If we can say the project can work with this and we can keep moving forward, then that’s where we should be.

“This is what the taxpayers agreed to. This is what we said we’d do,” he said.

Also at the special meeting Monday morning, the board:

• Continued to work on the county budget for the fiscal year beginning July 1. The county heard a budget request from the Floyd County Historical Museum, seeking $6,000 to help pay to replace the museum heating system, specifically the part of the system in the tractor room.

• Appointed dentist Dr. Scott Hansen to the Board of Health for a three-year term.