Back in 2007, Palo Alto County Supervisors faced some difficult choices. Several of the county's paved secondary roads had reached the end of their original design life, and the Secondary Road Department was spending large sums of money to patch and try to maintain the aging road system. Palo Alto County wasn't alone in this dilemma by any means. A majority of Iowa's 99 counties faced similar problems, as well as the state of Iowa and other states, as well as the federal government.
But, through legislation approved by the Iowa Legislature earlier in 2007, Palo Alto County Engineer Joel Fantz came up with a proposal for the Board of Supervisors to consider issue bonds in order to finance some badly-needed road reconstruction projects. At that time, the supervisors examined the concept, and held a series of public meetings around the county, explaining the idea, and promising that county residents would not be levied for more than $1.61 per thousand on their taxes to pay for the bonds. The taxpayers agreed with the need and the solution.
In doing so, Palo Alto County became the first county in Iowa to issue bonds to repair its crumbling infrastructure. Soon, several other counties were following suit, using the county's plan to develop bond issues of their own.
In late 2007, the Secondary Road Department sold its first bond, totaling $5 million. Proceeds from the bond were used to reconstruct seven miles of pavement east of Graettinger, as well as to pay for other road rehabilitation expenses, including the purchase of limestone rock for use on gravel road repairs. At that time, interest rates on the bonds came in at 4.35 percent.
In the past five years, Palo Alto County issued a second $5 million bond, and at the same time, interest rates on bond debt have declined. As part of the county's bond program, proceeds from the bonds not immediately being spent on road projects were invested by Palo Alto County Treasurer Mary Hilfiker to earn interest to assist with other projects. While the interest rates on investments haven't gone through the roof, the interest rates on bonds have continued to decline, prompting Fantz to approach the board recently with an idea to re-finance the county's bonds.
"Interest rates are at crazy low levels," Fantz explained earlier in the month. "The county's bonding committee has been looking at some figures and refinancing our bond debt to take advantage of the lower interest rates."
The bonding committee is comprised of Fantz, Hilfiker, County Auditor Carmen Moser and Deputy Auditor Robin Jamison, along with Supervisors Ed Noonan and Ron Graettinger.
Preliminary figures showed that refinancing the first $5 million bond at today's interest rates could generate a savings of $1.3 million for the county, and in turn, the taxpayers. Money from a re-financing would be placed into an escrow account until 2015, when the bonds are payable, at which time they would be paid off.
"It just seems to be a no-brainer to do this now, when you look at the risk and the benefits of a re-finance," Fantz told the supervisors. "We're actually paying the bonds off early using a levy rate of $1.50, saving the taxpayers money, as you pledged no more than a $1,61 levy to pay these off."
With the board in agreement to re-finance in the interest of saving the taxpayers money, the bonding committee is working closely with Bonding Attorneys Dorsey and Whitney of Des Moines and Piper Jaffrey and Associates to come up with a bond sale to take place on Dec. 3 of this year.