The Sturgeon Bay Common Council approved a resolution Aug. 1 to award the sale of $3.1 million in general obligation promissory notes to borrow money for a variety of capital projects and purchases.
The notes, which carry a true interest cost of 3.1834%, will provide financing for items in the 2023 budget, including street and parking-lot projects, improvements to public buildings, the purchase of vehicles and equipment, and infrastructure improvements in Tax Increment District (TID) #6. The interest rate used for planning purposes was 3.55%. Last year, the interest rate for the city’s bond issuance was 3.09%.
Brad Viegut, a managing director with R.W. Baird, which the city worked with for the note sale, said the city received a lower interest rate due to the higher bond rating – from Aa3 to Aa2 – from Moody’s Investor Service.
“To put it in perspective, it’s estimated that the interest rates on this issue were about roughly .1 lower than if they would have been without the Aa2 [rating], and that’s about $12,000 in total interest cost saved by having that rating,” he said.
Viegut said the city’s bond rating is now Moody’s third-highest rating, following Aaa and Aa1. The city’s healthy operating reserves, strong liquidity and low leverage drove the rating upgrade, according to the Moody’s report.
Mayor David Ward said the higher bond rating was “a very important event” that mirrored the city’s annual “good, clean audits,” and it showed market recognition of how the council and staff manage city finances.
Viegut said 10 firms bid on issuing the notes, with KeyBanc Capital Markets submitting the lowest bid at 3.1834%, which was only .0013% below the next lowest bidder, Loop Capital Markets; and less than .25% below the highest bidder, HilltopSecurities.
“Very tight bids, very competitive market,” Viegut said. “The Aa2, the bond upgrade, certainly helped attract these bidders.”
The borrowing increases the city’s tax-levy–supported debt by about $30,000 in 2024 to $1,685,870.
“From there, there’s an additional increase expected going into 2025, but keep in mind as we borrow, presuming you borrow in 2024, you would be seeing another step up in that total cost,” he said.
Of the $2.38 million in this year’s borrowing supported by the tax levy, the city will end up paying back $2,883,089, Viegut said.
Of the amount borrowed, $2,235,000 will finance a fire department brush truck, annual storm-sewer outlay and road improvements, a single-axle dump truck, designing improvements on Duluth Avenue south of Highway 42/57, annual alley and parking-lot expenses, repaving the Oak Street parking lot, garage doors and door replacement, a 40-horsepower tractor, an aquatic weed harvester, a water-weed truck and an aquatic plant management plan.
Another $145,000 will fund two squad cars, vehicle cameras and body cameras, and the remaining $720,000 is designated for TID #6 for Cherry Tree/Apple Tree Terrace and public infrastructure.