Time to separate wants from needs: Bonding counsel offers financing options for county projects
WORTHINGTON — Nobles County Commissioners have a better idea of when and how much they can bond for capital improvement plan projects after meeting with bond counsel George Eilertson and Chris Eng, of Northland Securities, in a special work session Monday.
The county has a long list of projects in which commissioners have to consider for funding.
The options range from broadband to roads and bridges, a potential new library, an addition to the sheriff’s garage at the Prairie Justice Center and a new roof on the PJC in the coming years.
“We’ve talked about how we’re going to catch up on roads,” said Nobles County Administrator Tom Johnson in kicking off the meeting. “How are we going to do a library project and then the CIP (Capital Improvement Plan) projects?”
Nobles County currently has a bond rating of AA+, one step down from a AAA bond rating. The high ranking gives the county an advantage in securing a lower interest rate if and when it opts to do a bonding project.
The county’s outstanding principal on its two existing bonds is $12.3 million — all of which stems from the bonds secured when the Prairie Justice Center was constructed and later refinanced. The largest outstanding bond is slated to reach maturity in 2022.
In previous work sessions, Nobles County Board Chairman Gene Metz said he didn’t want to add any more debt until the current bonds were paid off.
On Monday, Eilertson told commissioners they could issue new debt in 2019, at the earliest, without impacting the tax levy. He said the county could build the bond into its budget that year, make principal-only payments in 2020 and start collecting taxes to repay principal and interest starting in 2021.
“You could do $9 million and keep the impact to the taxpayers relatively the same,” Eilertson said, adding that the $9 million would be on an eight-year term. If the county wanted to stretch the term to 12 years, it could issue up to $13 million in bonds.
If the county didn’t want to wait until 2019, Eilertson said they could bond as early as 2017, if they are willing to increase the tax levy. To borrow $1.35 million at a 10-year term would amount to a $150,000 increase to the levy.
Eilertson explained the different financing options available to the county, from selling various types of bonds to increasing the $10 wheelage tax (the county can double the tax no sooner than 2018) or implementing a local option sales tax. The wheelage tax currently generates about $200,000 a year for Nobles County, while a local option sales tax could generate approximately $1 million annually. The wheelage tax must be used toward road projects, while the local option sales tax is also available for use on transportation infrastructure.
Eilertson said the local option sales tax is used by “well less than half” of Minnesota counties at this time, while the wheelage tax is broadly used.
Commissioner Don Linssen said he’d be concerned for local businesses if a local option sales tax was implemented, primarily because of Nobles County’s close proximity to Iowa and South Dakota.
Meanwhile, Commissioner Matt Widboom said he favored bonding as early as next year with minimal impact to the levy because of the favorable interest rates.
“We’re starting to lose faith that the state is going to come forward quickly on roads,” said Johnson. “We’re trying to figure out what we can do. With the oil prices and the market right now, it’s pretty favorable to do projects — and then you throw interest rates on top of it.”
Eng said that while interest rates on bonds are relatively low now, he anticipates they may remain flat for a while.
“It’s a good time to finance,” he said.
The next step for commissioners is to fine-tune the county’s capital improvement plan, identifying projects they may want to bond for.
Commissioner Bob Demuth Jr. said it’s time for commissioners to separate the wants from the needs.