Yield will be $2.54 million
The Jefferson city council finalized the sale of $2.46 million in general obligation corporate purpose bonds at its June 25 meeting. The terms offered by the high bidder will allow the council to reap $2.54 million, the total needed to cover the list of purposes the council approved for the bonds.
Tim Oswald of Piper Jaffray, the city’s financial advisor, led the council through five bids received. Every bidder offered an interest rate of 3 percent, with the “tie breaker” being the total purchase price each bidder proposed. Oswald explained complicated financial matters well enough that council members were able to nod their heads in understanding, but the intricacies of bonding is something most people seldom deal with.
The bottom line is that the winning bidder was First Bankers’ Banc Securities Inc of St Louis, MO, which offered a purchase price of $2,631,721, a true interest rate of 2.656 percent, and a net interest cost to the city of $857,253. Oswald calculated backwards to bring the proceeds of the bond sale to the $2.54 million needed. That’s how the actual bond sale was reduced to $2.46 million. A premium paid by First Bankers’ Banc Securities will make up the $80,000 difference.
“Resized” to $2.46 million, the true interest rate is 2.633 percent and the net interest cost will be $816,530.
The debt levy won’t increase to pay on the 2019 bonds until 2022. The debt levy is now 2.102 (per $1,000 in taxable valuation). The rate will be 2.105 in 2021 and then increase to 2.538 in 2022.
Council member Matt Wetrich pointed out that the city’s debt levy has been ore than 2.253 during the past 10 years, and that it will not go back to the previous rate.
Oswald also projected a need for the city to sell bonds in 2021 and 2023 for planned capital projects. The larges of those is resurfacing Lincoln Way from Elm St west to Grimmell Road. The project is estimated at $4 million. Ostwald suggested the council finance repayment of those bonds using revenue sources other than a debt levy.
The council set a public hearing for the July 9 meeting on a proposed amendment to the Urban Revitalization Plan. The hearing is the first step in changing the ordinances dealing with tax abatements. The change would provide for a 3-year abatement of all city property taxes for all classes of property except multi-family residential, and a 10-year abatement of all city property taxes on multi-family residential property.
The council will hold a second public hearing at that meeting to meet a requirement of the Community Development Block Grant the city received for an owner-occupied home rehabilitation program.
The council approved the third reading of ordinances to increase council members’ per meeting stipend from $30 to $60, and to increase the mayor’s monthly stipend from $200 to $400. The changes go into effect Jan. 1, 2020.
