Supervisors Set Hearing For Second Bond
While the recent economic news has caused much consternation across the country on the financial scene, the continuing drop in interest rates is providing a Palo Alto County with an unexpected opportunity. To cost of short-term bonds has gone downward in the past few weeks, and the Board of Supervisors discussed this turn of events during its weekly meeting on Feb. 5.
Palo Alto County Engineer Joel Fantz reviewed what the county has done to date with its bonding program for secondary road construction. The County agreed to bond a total of $11.8 million late last year for much-needed road construction and repair projects over the next few years. The bonding program was set up for three phases, with the first being a $5 million bond payable over 20 years, which the county entered into at the beginning of the year.
“As you all recall, we agreed when we developed our bonding plan, that we were going to issue three bonds, $5 million, $5 million and then the final $1.8 million bond,” Fantz briefed the supervisors. “But in the last few days, with the lowering of the interest rates by the Federal Reserve, the market for short terms bonds has become very, very attractive.”
“I honestly didn’t expect to be coming in so soon for the second bond,” Fantz continued, “but then we also didn’t expect the Federal Reserve to lower the interest rates so far, either. “It just makes sense to issue the second round of bonds now with the short term rates so favorable.”
The board took a few moments to let the thought sink in.
Fantz noted that 20 year, triple-A rated bonds, which the county purchased fir the first $5 million portion of the project, had an interest rate of 4.28 percent last month, but this month, the interest rate had dropped to 3.13 percent.
“Short-term bonds last month were at 4.34 percent, but this month, they are at 2.78 percent, and these are what we would look at for the second $5 million block,” Fantz said. “It would be my recommendation, and that of our financial advisors, to act now to take advantage of these low interest rates and issue the second bond.“
“If we can save on the interest by doing this now, I’m certainly in favor of it,” stated Supervisor Keith Wirtz.
“If we can do it now, we should,” agreed Supervisor Jerry Hofstad, and Supervisor Ron Graettinger also agreed.
However, the board, at Fantz’ recommendation, placed a call to bonding attorney Bob Josten in Des Moines. Fantz briefed Josten on what he had been discussing with the supervisors, and Josten agreed that it would be a sound move to act on the low rates at the current time.
“What you will need to do is to set up a public hearing on the additional loan agreement and bonds and to adopt a resolution to set your debt service property tax levy of $1.61 per thousands starting July 1, 2008,” Josten told the board. “Once you do this, then you meet the state’s requirements.”
The board set 10 a.m. Feb. 12 for the hearing.