The city of Coon Rapids went into the bond market last week and liked the result.
The city sold general obligation improvement and refunding bonds totaling $6,710,000 and received a true interest rate of 1.33 percent.
That’s one of the lowest interest rates, if not the lowest, the city has received on a bond issue in its history, according to Sharon Legg, finance director.
There were nine bids on the bond issue, which showed a lot of interest, Legg said.
“The interest rate was good,” she said.
“We entered the bond market at a good time. The interest rates had been going up, but they started to come back down again.”
The bond issue was authorized by the council at its Dec. 18, 2012 meeting.
At that time, it included both general obligation bonds for the street reconstruction work that had taken place in the city in 2011 and 2012 and a water revenue refunding bond, Legg said.
The water revenue bond when originally issued in 2003 amounted to $6,150,000; the refunding of the amount left to be paid totals $2,305,000, the bond issue resolution states.
At its first meeting of 2013, Jan. 7, the council approved the sale to take place Jan. 15 through its financial consultant, Ehlers & Associates, and set up a pricing committee to accept bids within certain interest rates.
The pricing committee comprised Mayor Tim Howe, City Manager Steve Gatlin and Legg.
The council also expanded the bond issue by $800,000 to include general obligation bonds for planned improvements to the Bunker Hills Golf Course this year – a new driving range, putting green, short-game practice area and a learning center building.
Golf course revenues will pay for that part of the bond issue, Legg said.
The low interest rate also saves the city more in interest costs by refunding the water revenue bonds – $210,000 compared with the $180,000 that the city had projected, according to Legg.
“That was better than expected,” Legg said.
State law required a 3 percent savings, she said. “We had a lot better savings than that,” Legg said.
The interest rates on the bonds when sold in 2003 ranged from 3.8 to 4.25 percent, she said.
For the bond issue, Moody’s, the New York City-based bond rating agency, confirmed the city’s bond rating of Aa1, only a AAA bond rating is higher, Legg said.
“We have had this bond rating for several years,” she said.
According to a press release from Moody’s, post sale the city has $21.5 million in general obligation bonds outstanding plus $13.8 million in outstanding lease revenue bonds, which were sold to finance the construction of the Coon Rapids Ice Center.
“The Aa1 rating reflects the city’s mature tax base that benefits from its favorable location near the Twin Cities metro area, stable financial operations with amply liquidity and affordable debt levels,” the Moody’s press release states.
City strengths, as stated by Moody’s, include maintenance of a 45 percent of the next’s year city budget in the fund balance for reserves, a low debt burden of .6 percent with a debt service comprising a “modest 12 percent of operating expenditures” and ample alternate liquidity available.
“Moody’s believes the city’s current debt levels will remain manageable given rapid payout and moderate future borrowing plans,” the press release states.
The city’s direct debt position and overall debt burden are both below state and national averages, it states.
According to Moody’s, challenges for the city are declining valuations, modest population loss and mature community with limited space for future development.
Peter Bodley is at [email protected]