The City of Sturgeon Bay is poised to borrow $4.37 million by selling general obligation promissory notes to finance numerous projects over the next 10 years. The general obligation notes mean the city is pledging its ability to leverage taxes to pay the debt.
The money would finance a list of 22 capital items and improvements that include remodeling and security upgrades for City Hall, downtown restrooms, a squad car, an assistant fire chief vehicle, a one-ton dump truck, Maple/Oregon Street Bridge road improvements, shore improvements, fire department vehicle laptops and mounts, and a library boiler.
The financial package includes refinancing debt issued in 2011 for the same term at a lower interest rate, saving an estimated $24,000.
The municipal bond market had hit “historic lows,” said Bradley Viegut, Baird managing director, during an Aug. 4 presentation before the Common Council. The fiscal estimate put the interest rate at a conservative 1.32 percent. Viegut said last week that if the bonds were sold that night, he would anticipate an interest rate of between 1.1 and 1.5 percent.
“It’s really extraordinary and unprecedented,” he said.
The Common Council passed the resolution that provides for the sale. Rather than issue the bonds on a competitive basis – as is the normal practice, with underwriters bidding and the city selecting the lowest interest rate – the bonds will be issued on a negotiated basis. That means Baird will agree to purchase the debt directly from the city and would receive comparisons.
The competitive process has less flexibility, Viegut said.
“The reason for the recommendation [for the negotiated basis] hinges on that refunding component,” he said. “If we get through the Sept. 1 date and it’s no longer cost effective, we can peel that out and still award the notes for the capital improvement component of the finance.”
Baird will market the obligation. The city is expected to award the notes and finalize the rates and financing in September.