Hearing held on pool
refinancing; city to
proceed with GO bonds
Tuesday, March 27, 2012 6:55 AM
On March 20, the Spring Grove City Council held a public hearing on the adoption of a property tax abatement for the purpose of financing the acquisition of the pool facility from the city's Economic Development Authority (EDA).
Michael Bubany of David Drown Associates answered questions from residents during the hearing.
He said the purpose of issuing general obligation (GO) bonds is to make payments on the city's Family SWIM Center less expensive.
"The only thing you're doing is changing the name of the levy from 'pool levy' to 'abatement levy,'" Bubany said. Currently, the EDA floats the loan, while the city leases the facility for the yearly payment, leaving the EDA harmless.
The term of the GO bonds would match the original EDA bonding. With payments beginning in 2013, the new bonds would be paid off in 2025. The amount would be $1,440,000.
Bubany said all taxable single-family residential homestead parcels in Spring Grove not currently part of a tax-increment financing district are listed in the abatement.
Resident Duane Olerud asked if new GO bonding would lower the city's ability to borrow?
"No," Bubany said. "The statute does have debt limitations for cities through something called net debt, which basically says you cannot issue more than 3 percent of your market value.
"However, just about every type of debt that a city issues is exempt from that... this would be exempt as well. It's not a new money issue, it's not adding (additional debt), so even if it did count, it wouldn't affect that.
"As far as credit rating, it won't affect the city. We're not adding debt, we're just replacing."
Bubany said interest rates for GO bonds are rising, and earlier estimates on the amount the issuance would save the city probably won't hold true. A rate of 2.5 percent was originally quoted, but rates are now .25 percent higher, he added.
The bonds would have to achieve at least $15,000 per year in savings in order to proceed, Bubany said. If that "trigger" isn't met, the city will owe nothing to David Drown Associates, he noted.
The city would most likely be able to call the bonds after 5 to 8 years without a prepayment penalty, Bubany said. Those conditions are part of the negotiation process and not locked in at this point.
With no further questions from residents, the public hearing was then closed.
Councilman Robert Vogel made a motion to adopt the GO bonding resolution. Councilmember Lorilyn Dehning seconded. The vote was unanimous, but without the ballot of Councilmember Rachel Storlie, who was not present.