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Delano to sell $9.33 million in bonds
May 23, 2016

BY GABE LICHT
Editor

DELANO, MN – When the Delano City Council moved to pay for the $6.53 million 2016 infrastructure improvement project Tuesday evening, it also opted to refinance about $2.8 million in existing bonds, resulting in about $279,000 in savings over 10 years.

2016 infrastructure improvement project
The $6.53 million project includes $4,865,000 for street reconstruction, $940,000 for water improvements, $535,000 for sanitary sewer improvements, and $190,000 for stormwater improvements.

“What we’ll do with the water (project) is specially assess DMU (Delano Municipal Utilities) for their portion of the principal and interest over the life of those bonds,” Finance Director Brian Bloch said.

Sanitary sewer and stormwater fees will pay for those portions of the project, while taxes will cover the street reconstruction portion.

Refinanced bonds
“Right now, the bond interest rates are about 3.2 to 3.3 percent. In the last five years, it’s been down there a couple times, but it hasn’t really been below that, so it’s a pretty good time to reissue bonds,” Bloch said. “There’s been several times over the last five years where it’s been significantly higher than that.”

The current interest rates on the bonds the city will refinance are between 4 and 4.5 percent, Bloch said.

Those bonds include about $1.3 million in 2006 A bonds for the Rockford Avenue project, about $1 million in 2007 stormwater bonds, and about $500,000 in 2009 E bonds for the downtown tax increment financing project.

“We first started on that project with an interfund loan, and then refinanced the interfund loan and issued this E bond,” Bloch said.

Debt limit
“Can you talk about what it does to our debt margin?” Councilwoman Holly Schrupp asked.

Bloch said, with the new street reconstruction bonds, the city would be using $13 million of the city’s current $13.2 million debt limit, which could affect future plans.

“In three years, for the next project, I don’t know if we have enough debt margin to issue it,” Bloch said. “It depends on how much our taxable market value in the city grows.”

City Administrator Phil Kern said the council had discussed the possibility of such a scenario in 2009 and 2010, when it decided not to assess property owners for street projects.

“Debt limit sounds scary,” Kern said. “It’s not like there’s a debt issue. There’s a cap on how much you can do certain types of debt. By choosing to do it this way, this becomes an issue. I don’t think it’s overly problematic because we’ll have debt falling off in five to six years, and that’s part of the whole plan we have for street reconstruction.”

Mayor Dale Graunke asked if state aid may be available to pay for a future street reconstruction project, which Kern said may be a possibility.

Odds and ends
In other business, the council:

• reviewed and tabled the landscape plan for Riverfront Park in downtown Delano until the work session at 7 p.m. Tuesday, May 31. The plan called for $7,435 in plants, which council members said was more expensive and extensive than initially planned.

• authorized the phosphorous removal study at the wastewater treatment facility.

• approved the additions of Dale Kimball, Leif Borg, James Thissen, Logan Hoiland, and Luke Rassatt as probationary firefighters. The city had advertised for the positions in April, and had received nine applications.

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