Refinancing funds could save city $300K
By DOUG CARDER, Herald Senior Writer | 4/25/2014
Refinancing a pair of Kansas Department of Health and Environment street revolving loan funds could pave the way for more street and sidewalk improvements this year in Ottawa.
Ottawa city commissioners last week voted 5-0 to approve a resolution authorizing the public sale of about $9.45 million in general obligation refunding and improvement bonds — which includes all estimated fees associated with the refinancing, city officials said.
The city is refinancing 2001 and 2008 KDHE loans to take advantage of more favorable interest rates. At the same time, the city also is issuing about $900,000 in street improvement bonds, Scott Bird, the city’s finance director, said. Combining the refinancing of the street revolving loan funds with the new bonds for street improvements — which would include about $250,000 for sidewalk upgrades — would save the city the expense of paying issuance costs for two separate bond issues, Bird said.
Refinancing the KDHE loans is anticipated to save the city about $311,000, or 4 percent of the net present value, based on current interest rates, Richard Nienstedt, city manager, said. The commission has set a minimum net savings of 2.25 percent to allow for fluctuations in the interest rate between now and when the transaction is expected to take place in June.
The $900,000 improvement bond issue — coupled with what already was budgeted for street repairs in 2014 — would give the city an opportunity to complete more than $1 million in street improvements this year, city officials said.
The additional funds would allow the city to get a jump on its street improvement program, Nienstedt said.
“What it amounts to is probably equal to doing three or four years worth of programs,” he said.
At a recent study session, Nienstedt and other city officials estimated the city annually dedicates about $250,000 to $300,000 toward street improvements.
“We also have the opportunity, under the classification of sidewalks along those [improved] streets, to upgrade intersections to ADA [Americans with Disabilities Act] standards, repair existing sidewalks, repair existing curbs and gutters and the construction of new sidewalks along any of these streets, if there is any money left over,” Nienstedt said.
Streets eligible for improvements would be thoroughfare-size avenues, Bill Ramsey, interim public works director, said.
“By [state] statute, there are certain streets [that can be improved], based on the classification of being a main traffic-way,” Ramsey said, “So, you cannot do this on low-volume roads. They will not qualify.”
The city will use several criteria to determine what streets will be improved, Ramsey said, and the list has not yet been finalized.
“In late 2013, the city employed TranSystems to do a street review, and it was a street evaluation using a computerized system called Paver which is a program that takes in about 19 different criteria to establish a numerical rating,” Ramsey said. “And that is the first piece we use in evaluating streets. The street department also looks at streets that have been giving them a lot of maintenance problems, we’ll look at traffic counts — the sum total of this comes down to we want to make sure the streets we put money towards are going to give us the best and biggest return for the investment you are making.”
Mike Skidmore, mayor pro tem, said he appreciated Nienstedt, Ramsey and other city staff working on the project.
“Last year, we tried to do this and interest rates moved against us and we lost an opportunity there, and that window of opportunity has come back to us,” Skidmore, who also is a banker, said. “I’m glad we are doing this. If we’re going to borrow money in the next three years, today’s the time to do it. I think rates are going higher.”
George K. Baum & Company, Kansas City, Mo., is serving as the financial advisor for the bond sale. The firm has worked with the city on previous bond issues.
“I think a year or two from now we would wish we would have done this, if we hadn’t done it tonight,” Skidmore said.