Council approves call for more than $15 million in bonds for various projects

Published 6:16 am Tuesday, June 11, 2024

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The Albert Lea City Council voted Monday to call for the sale of more than $15 million in general obligation bonds to pay for various improvements in the city, including the more than $9.8 million approved in a recent referendum for improvements to the city’s recreational facilities.

Specifically, the bonds would cover $15,555,000 and cover seven different purposes, said Rebecca Kurtz from Ehlers & Associates, a public finance advisement firm that assists the city.

Kurtz said there are two groups of street projects included — one for $3.035 million and one for $1.215 million. Projects include this year’s neighborhood improvement project, the state-aid overlay project, the Marshall Street and Sibley Avenue reconstruction, the Seventh Street and Winter Avenue reconstruction and the downtown alley reconstruction. The bonds for these projects will be paid back over 10 and 15 years utilizing special assessments and the tax levy.

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Other projects include improvements to both the sewer and water system that will both be paid back over a term of 10 years utilizing money from the sewer and water funds.

The $9.88 million in recreational facilities improvements will be paid back over 21 years utilizing the tax levy. About $465,000 will also go toward the new solar project at City Arena and $960,000 toward the new solar project at the wastewater treatment plant, both of which would be paid off in 15 years using property taxes.

Kurtz said the city’s first payment would be made in February 2026, with taxes for the projects starting to be collected in 2025. She said the city would have the ability to prepay or refinance in February 2034.       

City Manager Ian Rigg said the portion of the solar projects that was going to be paid for with federal incentives is not included in what is being bonded for.

Kurtz said the debt service starts out at $1.4 million annually but is reduced down to $750,000 in the final years as some of the bonds are paid off. Estimates are based off of current rates plus half a percent for market movement, which she estimated to be around 4.5%.

She said historically the city has issued bank-qualified debt, but because it is issuing over $10 million in bonds this time around, it will not be bank-qualified. Kurtz said despite this, she did not have any concerns.

The city’s bond rating will be reviewed by Standard & Poor’s. The city’s current rating is AA-, which Kurtz said is strong and is comparable and sometimes even a step higher than other similar cities.

She said while the city has a lot of good things going for it right now that could support a higher rating, there are some other things that are considered when deciding upon a rating, such as population, income and wages, that tend to be a challenge that hold communities back of Albert Lea’s size.

Some of the funds the city will receive for the recreation projects will not be needed immediately, and Mayor Rich Murray asked if Ehlers could help the city invest those funds in the meantime.

Kurtz said someone with the company could assist to help the city maximize an investment in accordance with federal guidelines.

Murray and Sixth Ward Councilor Brian Anderson also brought up watching the cost savings from the solar projects and making sure those savings weren’t lost and were instead applied to the debt.

Kurtz said she would return July 8 for the city to approve the sale once bids are received.