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Waupaca News
Home›News›Waupaca News›Waupaca set to borrow $6.1 million

Waupaca set to borrow $6.1 million

By WaupacaNow
September 21, 2020
3116
0

Debt to finance capital projects

By Angie Landsverk


The city of Waupaca is borrowing $6.1 million to finance capital improvement projects in 2020 and 2021 and to also refinance a 2010 debt issue.

The common council unanimously approved the resolution earlier this month.

All council members were present.

The estimated interest rate on the General Obligation Promissory Notes is 1.27%.

Justin Fischer, of RW Baird, told the council this month’s resolution was a follow-up to what the council discussed in April.
RW Baird is the city’s financial adviser.

“At that time, we were talking about establishing parameters for a smaller amount,” Fischer said in regard to the spring discussion.

In April, the council voted unanimously to establish parameters for the sale of notes that would not exceed $3.75 million.

That amount was based on borrowing $1.5 million to finance part of this year’s capital projects and also on refinancing a 2010 debt issue of about $2 million.

The debt issue is for Tax Incremental District (TID) 8, which is the East Gateway.

Lower interest rates

“In April, the financial markets were in complete flux,” Fischer said.

As expected and hoped, interest rates are down, he said.

Fischer said there is a high demand for municipal bonds.

The significant drop in interest rates resulted in the recommendation that the city borrow for this year’s capital projects, and for 2021 projects as well.

“Due to the favorable financial position the city is in, and the lower rates available on the open market, it was determined to again go out to bond for the 2020 capital projects, as well as an estimated amount ($2.5 million) for the 2021 capital projects to take advantage of the lower interest rate environment we are in, especially since 2021 is the year the city will be financing its portion of the Main Street reconstruction project,” Kathy Kasza wrote in a staff report.

She is the city’s finance director and treasurer.

Kasza said the majority of the funds for 2021 projects will be to finance the city’s portion of the Main Street project.

She also noted that if it looks like a project slated for 2021 will not be accomplished, or if the council decides to not go forward with it, the city has two years to spend that money.

That would then shorten the amount the city needs to borrow in 2022 for capital projects, Kasza said.

“Baird is looking at a 4% interest rate for 2022 bonds, so there’s a savings going to market now and being able to hold the money and do projects,” she told the council.

The council was scheduled to discuss the 2021 capital improvement plan during a Tuesday, Sept. 15 budget workshop.

Kasza said the lower interest rates is also the reason why staff recommended refinancing the outstanding principal for TID 8.

“The estimated savings of the refinancing would provide $563,000 in interest and allow the TID debt to be paid off by 2024 instead of 2030, which will allow the city to close that TID earlier than originally estimated,” she wrote in her report.

Mayor Brian Smith said the interest rate on the TID 8 bond is above 4%, so the “savings there shows it more than warrants doing it at this time.”

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