Mike Bubany, of David Drown Associates, addressed the Spring Valley City Council to discuss an electric revenue bond during a special meeting on Oct. 5.

“For many months now I’ve been working with the Utilities Commission on this $6 million project. They are upgrading a substation and they are burying the lines on the north side of town,” Bubany explained. “Electric debt, unlike the debt that the City Council issues, does not carry the general obligation pledge, so when we issue electric debt we have to do a lot more stuff in the background to make the deal more palatable to the investors.”

While the Public Utilities Commission had a couple of different options to choose from for the bonding process, it determined the debt service reserve was the best option.

“A debt service reserve is basically, in addition to the project, the utilities would agree to keep a certain amount of dollars on hand at all times reserved specifically for the bond. There are some IRS tests that we have to pass to determine what that amount is and in this case it would have been around $400,000,” Bubany said. “Originally, we had planned on doing the bond issue for the capital part of the project by using our own cash for the $400,000, but as part of the process one of the things we had to decide was to do a competitive sale or negotiated sale.”

According to Bubany, the Public Utilities Commission members decided to go with the negotiated sale because they wanted to be able to adjust the amounts on the fly and pick the day of pricing.

Five firms were solicited for the purchase of the bonds with Robert W. Baird and Company winning the sale for $5,565,000.

“One of the things that we did yesterday was determine if we could get insurance for this deal; that would help it trade at a better rate because there is an insurance company that we pay a premium to that basically guarantees the bond,” Bubany said. “One of the extra benefits that we found in the policy is a surety bond where the insurance company will carry that debt service reserve on our behalf. So that $400,000 is freed up, so we jammed it back into the deal to buy down the amount of the bonds. What you will see is the surety bond for $38,374.32 which is the price for that and in return we’re lowering our interest expense by well over $100,000 so it is more than worth it.”

The council voted to approve the resolution for the purchase.

Other business

• City administrator Deb Zimmer reminded the council that the city’s contract with Gold Cross will expire in December. In preparation for this she asked the council members to consider adding options into the new contract in the event that they would need to hire full-time or part-time EMTs, as well as increasing call time pay for the EMTs and first responders.

While no action was taken council members agreed the options should be included, while the call pay was tabled for future review.

• Zimmer noted the city has received calls about parking due to the Public Utilities work, which has taken over a portion of the city parking lot. She stated those persons living in the affected downtown area will be offered parking permits for the south side of Washington Avenue.