District prepares for $1.9M bond issuance
The Shell Rock River Watershed District board of managers last week approved the issuance of up to $1.96 million of limited tax bonds — if certain parameters are met.
The resolution passed 5-1, with Mick Delger, Brad Kramer, Al Bakken, Mike Hanson and Dan DeBoer voting in favor of the resolution. Board manager Joe Pacovsky voted no.
The resolution ultimately authorizes the board chairman, DeBoer, and the district administrator, Brett Behnke, to execute a bond purchase agreement, at a fixed interest rate prior to the next regular meeting, according to Shannon Sweeney, an associate representative from David Drown Associates Inc., a financial consultant firm out of Minneapolis.
Following the execution of a bond, the board at a future board meeting could then pass a resolution that ratified the bond purchase agreement.
“The reason we do that is this — an underwriter that is purchasing and then reselling the bonds can hold a price for about 24 hours. Which means we either have to do a bond sale on the day of a board meeting or we do a parameters resolution such as what is being proposed in order to fix an interest rate more than 24 hours in advance of a board meeting,” Sweeney said.
The proceeds of the bonds will be used, together with any additional funds of the district, to finance the first contract for the dredging of Fountain Lake.
After the discussion of the board, Behnke said, “I think through the budget process, you will see the true need for this bond and it will come to light where our budget lays and how it plays out over the next five years. And I think you will think much differently about the approach we are taking on this.”
Sweeney explained to the board that by taking this action to approve the parameters resolution, David Drown Associates Inc. would have more leeway with a timeline to purchase the bonds, as well as “garner a better price in the marketplace.”
As far as progress that has been made with funding the project, Sweeney reported the expectation for a credit rating to be in hand in the coming weeks.
“Once we have the (credit) rating in hand, we are able to essentially negotiate almost immediately with an underwriter for the purpose of selling bonds,” Sweeney said.
The board heard discussion from district board managers Pacovsky and Hanson.
“I, for one, am uncomfortable with this. I think we need to have a budget in place and some method of — some certainty — that we are going to be using sales tax proceeds to repay these bonds. The citizens of Albert Lea approved a sales tax increase but not a property tax increase,” Pacovsky said.
“And also, from the timeline, we don’t have a budget yet, we don’t know what the dredging costs are going to be so I think we are premature on crashing ahead at this point,” Pacovsky said.
“My only comment is that, since I recognize that we need to move ahead with the dredging, and also, secondly, recognize the need for cash flow, I feel like we should support this, but I think we should be zealous in our efforts to not allow the levy to go past the first year and try to use other sources of income to repay the bonds,” Hanson said immediately after hearing Pacovsky’s concerns.
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