City commission considers refinancing 2004 bond
The City of Holton has the potential to save nearly $86,000 in interest costs by refinancing a 2004 bond issue, the Holton City Commission learned during its Monday evening meeting.
Dustin Avey, managing director of public finance investment banking for the Piper Jaffray investment firm’s Leawood office, met with commissioners to discuss options for refinancing the city’s series 2004A bonds, which were issued at that time to refinance $5.23 million in series 1999 electric system revenue bonds with a better interest rate.
The series 2004A bonds are expected to reach maturity in 2020, Avey told commissioners, but they are currently carrying an interest rate between 3.5 and 4 percent. Instead, the city has the opportunity to refinance the bonds to carry an anticipated interest rate of between 2.5 and 3 percent, which has the potential to save the city a projected total of $85,969.17, he added.
Commissioners did not take any formal action on Avey’s proposal, but expressed a desire to go ahead and seek a lower interest rate on the bonds, which have a current payoff amount of about $1,895,000.
“I don’t know if there would be much discussion in saying why we shouldn’t do this,” commissioner Erich Campbell said. “I would like for us to pursue this avenue, but keep our bond payments the same so that we can pay it down faster.”
Holton City Manager Bret Bauer told commissioners that if they wished to pursue the matter further, action would be required at a future commission meeting, adding that a bond resolution could be prepared for the commission’s Monday, Oct. 19 meeting. Avey said he would present the commission with bond documents that have a low rate “locked in” at that time.
The series 2004A bonds were issued to refinance the 1999 series bonds in order to get a lower interest rate, it was reported. The 1999 bonds were issued to cover the cost of improvements at the city’s electric power plant, including the purchase of two generators that would provide a total output of 6.3 megawatts of power.
At the time of the 2004A bonds’ issuance, the George K. Baum and Company investment firm of Kansas City had locked in an interest rate of about 3.5 percent to better an interest rate of 4.8 percent the city was paying on the 1999 series bonds at that time. With the issuance of new refinancing bonds with an even lower rate, Avey said, the city stood to save even more in spite of the bond reaching its maturity in about five years.
“We’re still at very low interest rates in terms of where we’ve been historically,” Avey said. “Since 1987, rates have been higher than the current levels almost 95 percent of the time… A year ago, the (market) interest rates on municipal bonds were right around 2.2 percent, and they’re still at about 2.2 percent today.”
The 2004A bonds are “currently callable” and “can be refinanced at any date,” Avey also noted.
The cost of refinancing the 2004A bonds included an estimated $18,130 for the cost of issuing the bonds and $15,650 for Piper Jaffray’s related services, for an estimated total of $33,780, it was noted. However, Avey and Bauer told commissioners that the amount of projected savings was figured after those costs.
In other business on Monday, commissioners voted 3-1 to approve the purchase of a new Ford Explorer Interceptor from Foster Ford of Holton for the Holton Police Department, replacing a 2007 Chevrolet Impala that Police Chief Gale Gakle said had racked up more than $6,600 in maintenance costs for his department since its purchase.
Foster bid $27,100 for the vehicle, and commissioners noted a $27,560.88 bid for an Explorer Interceptor through the Kansas Highway Patrol’s Kansas Partners Program. The vehicle will be purchased with funds from the police department’s capital outlay budget, it was reported.
Morris voted in opposition to the purchase, saying that a new Impala — bids for which were received from Clark Chevrolet Buick of Holton ($21,685) and the Partners Program ($22,013.96) — would be economically better for the city, both in terms of purchase price and fuel economy. Gakle countered that the Impala “really isn’t big enough” for officers and their equipment, preferring the Explorer’s all-wheel drive capability and room for officers and equipment.
Concerning disposition of the 2007 Impala, Gakle recommended that the city sell the vehicle at an auction, noting that the city would get more money out of the vehicle that way than it would get in trade-in value for the new vehicle. Bauer agreed, saying that “in the last couple of years, we’ve had some good luck at auctions” where used city vehicles were up for sale.
Commissioners also noted bids were received for a Ford Taurus patrol car, with bids of $24,640 coming from Foster Ford and $23,662.28 coming from the Partners Program.
* Noted the absence of commissioner Dan Brenner. Commissioners present included Campbell, Morris, Twila White and Mayor Robert Dieckmann.
* Approved minutes from the commission’s Sept. 8 meeting, as well as budget appropriations made since that meeting.
* Accepted a $1,150,422.17 bid from King’s Construction of Oskaloosa for the Banner Road extension project (see related story).
* Discussed the possibility of holding a “town hall” or “workshop” meeting and inviting Holton residents to the meeting to provide commissioners with, as Morris put it, “what they expect of us to do with the money we’re taking in,” as well as the direction commissioners are expected to take with their governing action. The meeting was tentatively scheduled for 5:30 p.m. Monday, Oct. 19, prior to that evening’s regular commission meeting.
* Heard updates from Bauer on road reconstruction work at the Holton Industrial Park, spillway inspections and possible repairs at Prairie Lake and the leak at the city’s swimming pool. Concerning the latter, Bauer said there are two valves located in the pool’s deep end grate that could potentially be the cause of the leak, and those valves should be inexpensive to replace.
* Were reminded of the Oct. 1 opening date for bids on sewer line point repairs. Bauer said action on the bid award may be taken at the commission’s Monday, Oct. 5 meeting.
* Heard a comment from Campbell about whether any more consideration had been given to selling the four available lots at the Holton Industrial Park with assistance from a realtor. Bauer said city staff would “look further into that.”
* Discussed possible locations for a dog park after Bauer noted the receipt of a financial gift to the city to be used for that specific purpose. He added that if the commission chose to accept the gift, it would have to be used for creation of a dog park.
* Met in executive session for five minutes to discuss personnel matters. No action resulted from the session.
* Adjourned the meeting at 8:20 p.m.