By Kevin Boneske
Staff Writer
HOWARD – The village board approved a pair of resolutions Monday, May 13, to finance the construction of the third building for the Howard Commons apartment complex.
Board members were informed about the financial details from Justin Fischer, a senior vice president from Baird.
Baird has been consulting with the village to bond for the project with interim financing (note anticipation notes) and refinancing for the long term (general obligation promissory notes).
Fischer said the resolution to provide interim financing for the project calls for issuing not more than $9.995 million in note anticipation notes (NAN), which would mature Dec. 1, 2023, with the first interest payment being made on Dec. 1, 2019, at an estimated interest rate of 2.75 percent.
“The plan is to pay that interest, and potentially the 2020 borrowing interest, with capitalized interest,” he said. “That will allow the village to build this thing… because (rent is) ultimately what’s going to be used to make these payments going forward. But as this is being built, we have to be very careful how we structure the debt going forward.”
Fischer said a resolution to finalize the term and interest rate of the borrowing will be before the board at its next meeting on June 10 with the funds being available on July 1.
In 2017, the board approved borrowing for and bids on the construction of the Howard Commons apartment complex for Buildings A and B.
The village issued NAN in 2017 for approximately $10 million and NAN had been approved in 2018 for approximately $16 million, prior to authorizing NAN up to $9.995 million this year for Building C now under construction.
Fischer pointed out the financing plan for the Howard Commons, based on the assumptions provided by Alliance Management, which has an agreement with the village to manage and market the apartment complex, projects revenues will exceed total expenditures with annual surplus revenues of approximately $125,000 from 2024 to 2042, as well as potential surplus revenue in 2019 and 2020 that could be used to reduce long-term borrowing.
“You don’t want to lock long-term (interest) rates without exactly knowing where you’re going to be, because there could be something that comes up unexpected and so forth,” he said. “The plan is to really build up that surplus revenue, and when we start doing the longer term financing, use some of that surplus revenue to reduce the long-term borrowings.”
Fischer said accumulating an annual surplus of $125,000 could be used for covering unexpected costs, etc.
“When it comes to the end of the life of these borrowings, we can use the surplus and pay off the debt, pay off these apartment buildings sooner, rather than later,” he said. “The projected plan right now is to have everything paid off by 2043.”
Apartment occupancy
The board also received a report related to occupancy in the Howard Commons.
With 84 units in Building A and 39 in Building B, Village Administrator Paul Evert said the number of units rented this month, 67 and 20, respectively, has exceeded the projections of 63 and 16.
Based on more than 110 units expected to be occupied by the end of the year in those two buildings combined, Evert said the average projected occupancy for 2019 would exceed the average goal budgeted for this year of 70 percent.
As noted in the report, Building A was available for occupancy last September with Building B opening in December.
The 45-unit Building C is scheduled to be completed in the spring of 2020.