The Cottage Grove City Council approved the issuance and sale of $16,025,000 in new General Obligation (GO) Bonds at the Feb. 21 regular meeting. GOs, municipal bonds that allow the city to raise funding for projects that may not provide immediate revenue streams, are guaranteed to be paid back by the city over a period of time through available revenue sources, including special assessments and tax levies.
With the planned bond issuance originally estimated nearer to $18 million, the city’s recently achieved AAA credit rating allowed for highly favorable credit terms, in this case saving resident taxpayers approximately $2 million in financing costs for the planned 2024 projects.
Cottage Grove City Finance Director Brenda Malinowski spoke to the council, giving an outline of the projects to be financed by the new GO bonds.
“This bond issuance includes funding for our Utilities Building, our 2024 Pavement Management, some of our Street Reconstruction Overlay Plan bonds, specifically for our 2024 construction on East Point Douglas, construction on Jamaica Avenue from 80th Street to 90th Street, and then lastly, three pieces of equipment and equipment certificates,” said Malinowski.
“All of those projects were included in our five-year Capital Improvement Plan,” she continued. “We do that annually here at the city. We look at all of our projects that are over $15,000 and we look at how we’re going to fund those. Some of those are going to be funded with debt issuance, bond issuance, and that’s what we’re talking about this evening.”
She noted that this planned debt issuance was included in the city’s recent 10-year financial management plan.
Stacie Kvilvang, Senior Municipal Advisor with financial advisory firm Ehlers, Inc, presented the results of the recent bond bidding process.
“With each bond issue that we have, we have to have it rated,” she said. “You are rated by Standard & Poor’s. A couple of weeks ago, Ms. (Brenda) Malinowski and (City Administrator) Ms. (Jennifer) Levitt participated in that rating call with S&P, and we’re happy to say, as you know, that they affirmed your AAA rating with a stable outlook, which is great.”
Kvilvang noted that the bond sale took place on the morning of Feb. 21, and that it received 12 bids, which was a strong showing.
“One of things that we do with staff as we’re looking at your funding needs and talking about issuing debt is we look at timing,” she explained. “The reality is, the funds will be here March 12 or 13, and essentially the funding probably wasn’t needed as early as that, but we knew that there wouldn’t be as much on the market, so it was a good time.”
Kvilvang continued, “As the mayor noted earlier, the par amount of the bonds was reduced by $2 million because we received a premium bid, and so tonight you’d be awarding the sale of the bonds to BofA out of New York as the lowest responsible bidder.”
“Fantastic,” replied Mayor Myron Bailey. “I just have to say when Brenda (Malinowski) and Jennifer (Levitt) mentioned earlier that you have to change the number by $2 million savings, in essence, to our citizens, that’s just phenomenal.”
Councilmember Justin Olsen thanked Kvilvang and city staff for putting the bond sale together and for their work on the city’s long-term financial management plan, allowing Cottage Grove residents to capitalize on the benefits of the city’s new AAA rating. Regarding the number of bids received, he commented that he couldn’t remember ever seeing more than eight or nine bids on a bond sale in his time on the council.
“Twelve bids means that the public likes our paper, the financial institutions are watching us, and it’s a reaffirmation of that AAA rating,” said Olsen. “Again, that’s compliments to you and our staff for working so well together to provide us with that really important financial guidance that we need to stay on track and make sure that our residents are receiving the very best services they can receive for the lowest cost possible.”
Councilmember Monique Garza made a motion to adopt the $16,025,000 bond issuance resolution 2024A. The motion was seconded by Councilmember Tony Khambata, which passed unanimously upon vote.
