Financing Oshkosh Street, new bucket truck

NEW LONDON – The city of New London will seek to borrow $600,000 from the state trust fund to pay for a new bucket truck for the New London Department of Public Works and to pay its share of the Oshkosh Street project costs.
At its June 4 meeting, the New London Finance & Personnel Committee approved directing New London Finance Director Judy Radke to start the financing process for funding the city’s share of the Oshkosh Street project and to purchase a bucket truck by applying for a loan through the state trust fund.
Also, at the meeting, Radke told the committee that she planned to use the city’s unassigned fund balance to pay the current costs of the Oshkosh Street project. The fund will be reimbursed once the city receives the funds from the $2.1 million grant it was awarded for the project, which will be next year sometime.

Committee meeting
Radke told the committee that going out to bonding costs a lot of money, and Harry Allen, municipal advisor with Ehlers, the city’s financial advisor, told her that if the city isn’t going out to bonding for at least $1 million, then the city can’t go to market for the bonding.

Over the last few weeks, Radke said she has been meeting with Allen and representatives from First State Bank regarding financing for the bucket truck and the city’s portion of the Oshkosh Street project costs. Along with those discussions, Radke said the city has a $2.1 million grant coming back for the remaining costs of the Oshkosh Street project, but the city must sit on that grant for one year.
“Because they’re going to put the road down, and then they’re going to wait for it to settle, and then they’re going to put the top on the road,” Radke said. “And there is a specific date that they have to finish by, I think it’s July of next year, and then we’ll be able to put in for the grant and get our grant dollars back.”
Radke said the city is considering using the state trust fund to pay for the bucket truck for the city’s Department of Public Works and to pay around $400,000 for the city’s share of the Oshkosh Street project costs. Using the state trust fund would be beneficial because it doesn’t cost the city anything to use it.
“They don’t have any administrative fees, anything of that nature,” Radke said. “So, then I can control how many years we’re going to bond for these dollars. This is actually a loan, not a bond.”
But after further discussions with Allen, Radke said it would be more beneficial for the city to pay for the bucket truck over three years. This would decrease the amount of interest the city would have to pay.
Radke told the committee that she hadn’t submitted an application for a loan from the state trust fund yet, as she wanted to get the opinion of the committee first.
The city’s unassigned fund balance is around $3.2 million, plus an additional $800,000 set aside for retirement reserves for sick leave.
“I think we’ll be safe,” Radke said.
Ald. Tim Roberts asked why the city is “scrambling” to make these financial decisions.
“Why are we not prepared,” Roberts asked.
“We’re not scrambling,” Radke countered. “… I think I’ve been coming in here the last four months talking about we’re going to have some other debt, that we have to, you know, decide to get, and actually the longer we wait, the less interest we’re paying. But I think at this point, it is the time where we actually need to pull the trigger on getting the dollars and fulfilling our commitment to the project. We have to take out the money in order to finish the project on Oshkosh Street.”
New London City Administrator Chad Hoerth said complicating the situation is the city needs to wait until the Oshkosh Street project is completed to get payment for the $2.1 million grant because the city is required to submit only one reimbursement request for the grant. He said the city could finish the project this year and get reimbursed this year, but the engineers for the project would like to put only the binder layer on the roadway this year, and then let it settle over the winter. Then, next year the top surface layer would be added to the roadway.
Radke said the city would not borrow $2.1 million while it waits for the grant funds. Instead, the city would “borrow” from itself.
“We have enough money sitting in the bank that we can borrow from ourselves, so we don’t have to go out and pay anymore interest on those dollars,” Radke said. “Fund it ourself until next year when we get those dollars back from the state of Wisconsin.”

The Plan

To pay for the current costs of the Oshkosh Street project, the city would use funds from its unassigned fund balance. Once the city receives funds from the $2.1 million grant, it would reimburse the unassigned fund balance.
Also, the state trust fund would be used to borrow funds from to pay for a bucket truck for the New London Department of Public Works. This loan would be for $214,000 at 5.5%. This loan would be paid off in three years.
“The reason for that is because over the next two years our debt actually drops $100,000,” Radke said. “So, we’d be able to fit within our current debt structure and not have to increase our debt to the taxpayer for the next three years.”
The city would also borrow $386,000 at 5.5% to cover its share of the Oshkosh Street project costs, Radke said.
This loan would be paid back over 10 years, using revenue from TID 4 increment. Radke said this loan could be paid off early if the interest rate the next time the city borrows money through bonding is lower than the interest rate of this loan.
New London Mayor Mark Herter said he was in favor of moving forward with the plan Radke presented.
He also asked how this plan would impact the city’s wastewater treatment plant, which has some needs to address.
“This does not affect that at all,” Radke said.
She added, “When you look at the wastewater treatment plant, what we just took out is called revenue debt. Revenue debt means the stream of revenue from the plant itself pays for this debt, not the taxpayers’ dollars.”