Ehlers has been a financial advisor for such Anoka County communities as Andover, Anoka and Coon Rapids. It can now add East Bethel to its resume.City Administrator Jack Davis said the city never had a contract with Springsted, which had been the city’s chosen financial advisor since 2004, so there was no financial penalty to end the working relationship with them.
“The selection of the financial consultant is more a recognition that the city will be working with a certain firm to develop a consistency and a history for future financial advice on bond issues and financing matters,” Davis said.
Mayor Richard Lawrence and Councilmembers Robert DeRoche Jr. and Heidi Moegerle chose Ehlers as the city’s new financial consultant during a 6 p.m. Aug. 6 council meeting held before a budget workshop. Councilmembers Bill Boyer and Steve Voss were absent.
For over an hour before its regular Aug. 1 meeting, the council interviewed Ehlers, Springsted, Northland Securities and The PFM Group. DeRoche, Lawrence and Moegerle were the only ones who showed up for the interviews. Voss came during the regular Aug. 1 meeting when the vote was taken.
The council had to schedule the Aug. 6 meeting because there was a split decision on Aug. 1 and Boyer was not there to potentially break any ties. DeRoche and Moegerle at that time voted for Northland Securities, which had consulted the city of East Bethel between 1998 and 2004. Lawrence and Voss preferred Springsted at that time.
DeRoche said he initially wrote down Northland as his first choice on Aug. 1 because they had worked with the city and he was impressed with what he read about them.
When Lawrence and Voss did not vote for Northland, DeRoche said he had more time to evaluate the proposals and talk with other communities. Ehlers’ name kept coming up, specifically for its background in working with tax increment financing (TIF) districts. East Bethel’s council is contemplating a $300,000 TIF district to help Aggressive Hydraulics move its hydraulics manufacturing business and its approximately 50 employees from Blaine.
Lawrence feels Springsted is a very powerful company because of its size. However, he was also impressed with Ehlers, so after DeRoche on Aug. 6 made a motion to approve Ehlers and Lawrence gave his opinion on Springsted, he agreed to approve Ehlers.
Voss was not present at the Aug. 6 meeting because he was on vacation. While he said East Bethel has worked with Ehlers in the past and he has not heard anything negative about them, he heard no reason given on why a switch was necessary.
When asked for reasoning, Moegerle questioned the advice the council got from Springsted in February of this year. At that time, Springsted President Kathy Aho said the city could save about $141,000 by refinancing to a lower interest rate because the interest rate market was at historic lows.
The downside was that refinancing would have cost the city about $50,000 up front to save an estimated $141,000 over the long-term, and the type of refinancing recommended meant the city could not have lowered its debt service levy until 2014 and the city could not have advanced refinanced these specific bonds again. Therefore, it was a gamble on what future interest rates would do.
The council received the initial Springsted report in early February of this year. By late March, a 0.04 percent interest rate increase would have reduced the savings to only about $60,000, so the council did not proceed.
Moegerle heard from the people who the council interviewed that the city could save more now if it advanced refinanced versus if it had advanced refinanced earlier this year. Her top two choices were Ehlers and Northland because of their experience and presentations. When DeRoche made the motion to approve Ehlers, she was agreeable to this.
Springsted was the financial advisor when the council in November 2010 approved three bond issuances totalling $18.825 million for the city’s share of the sewer and water project.
Lawrence said he did not hold what happened then against Springsted.
“We don’t know if it’s a bad project because we’re not even into it yet,” Lawrence said. “We won’t know for several years. I don’t hold anything against Springsted for doing their job.”
This history mattered more to DeRoche, however.
“I personally don’t think Springsted was looking out for the people’s best interest,” DeRoche said.
Eric Hagen is at [email protected]