By Kevin Boneske
Staff Writer
HOWARD – To take advantage of favorable interest rates, the village board approved three resolutions Monday, Jan. 11, to authorize the sale of up to $4.5 million in general obligation bonds to make street and sewerage improvements.
The resolutions approved the overall bonding amount, as well as specifically limiting bonds for financing sewerage (i.e. storm sewer) improvements to $1.26 million and road and sidewalk improvements to $3.24 million.
The board previously backed the borrowing Nov. 23 when it finalized the 2021 budget to finance the reconstruction of two portions of Evergreen Avenue and one section of Pinecrest Road.
Given the opportunity to borrow money at interest rates less than the expected rates of inflation to repair roads, the board added $40,000 to the tax levy for interest to fund the additional work in the 2021 budget.
Chris Haltom, director of administrative services, said village staff put together estimates for doing work on the three sections of roadway the board favored improving and found the cost to be less than the original rough estimates.
Haltom said staff then looked into if any of the roads could be extended further, and if there were any good reasons for the extension.
He said the board last summer approved a development for eight new lots on Evergreen, while there is a parcel just west of the bridge where the project was originally scheduled to end.
Haltom said the development will need sewer extended, and it seems reasonable to create an urban section of road leading to the development with bonding.
“They do have water, they don’t have sewer, so it makes sense to extend the project to that,” he said.
To extend the new roadway improvements to the new development, Haltom said the developer would have to pay for the improvements benefiting the developer upfront to get the total cost at $4.5 million for the road, sidewalk and storm sewer work.
“Years ago, that’s how all the developers paid for the projects,” he said. “Once 2008 hit, banks were no longer loaning for these types of projects. The village became the bank for these projects. For that particular project, we will need to provide the financing all the way, in order to do the improvements all the way up to that area.”
Justin Fisher of Baird presented the board with details for the borrowing.
Fisher said interest rates remain at historically low levels, and the village would be able to borrow up to $4.5 million – with $3.24 million for road and sidewalk projects and $1.26 million for storm sewer projects – at an estimated interest rate of 1.55 percent over 15 years.
He said the board will consider a resolution at its Feb. 8 meeting to lock in the interest rate for financing the bonds, with funds being received for the projects March 1.
Based on 1.55 percent interest, Fisher said the financing plan includes annual payments of around $340,000 from 2022 to 2036.
When including $40,700 in interest only for 2021, the plan he presented shows repaying $4.5 million in bonds would result in the village incurring $653,785 in interest for a total of $5,153,785.
With Howard having an equalized value exceeding $2 billion and municipalities allowed to borrow up to 5 percent of equalized value, Fisher said the village would have plenty of bonding capacity available for other future improvements, if needed.