Marion taking a deliberate approach to bond reissue

Marion taking a deliberate approach to bond reissue

City may not sell all $ 16 million at once

news@theeveningtimes.com

Marion is gearing up to issue municipal bonds which were approved by voters in March or a new round of capital improvement projects, but may not sell all $16 million at once.

Mayor Frank Fogleman told the city council that without a firm date from the state for the railroad overpass construction and improvements to Military Road, the city may have to sell some of the bonds as taxable at a later date.

“It is still developing, but on our bond issue, the timing of when we do things is critical,” Fogleman said.

“We have a limited time to spend the money. We have two projects that fall under the Highway Department which makes the projects go slower, specifically the overpass and the improvements to Military Road. We may need to sell a portion of our bonds now and a portion of them later.”

Voters in March authorized the city to refinance some old bonds for another 30 years for a new round of projects, including the railroad overpass.

The city will receive $12.185 million for street improvements; $2.285 million for the Fire Department; $1.075 million for park improvements; $815,000 for water projects; $635,000 for the Police Department; $360,000 for sewer improvements; and $220,000 for the library.

The railroad overpass is at least 18 months to two years off before construction will likely begin. The overpass will be built next to the Walmart Neighborhood Grocery and go over the Burlington Northern Santa Fe railroad tracks and connect to Military Road.

The project is expected to cost about $10.5 million.

The federal government has already earmarked $5 million for the project.

The city is also waiting on a timetable for construction to begin on Military Road.

The state is planning to widen Military Road to four lanes and the city may piggyback on those plans and pay for additional improvements as part of its downtown revitalization plans.

In the meantime, the city may sell $4 to $5 million of the bond total to get started on other projects like street overlays, building an addition to the Woolfolk Library, purchasing some additional breathing apparatus for the fire department, and a new forced mane to the city’s sewer pond.

Fogleman said he has spoken to the Highway Department but they are not willing to commit to any firm timetable for the overpass and Military Road.

“I have asked them to write a letter (to the bond attorney) stating the timeline of when construction will begin,” Fogleman said. “But they said it us up to the local engineers.”

Fogleman said the city has the flexibility to issue some of the bonds as tax exempt and some of them as taxable.

Taxable bonds do not have a timeline requirement, Fogleman said.

However, selling some of the bonds as taxable could cost the city an additional $650,000 in interest over 30 years.

“If we go partly with taxable, it will impact the long term cost of the bond issue,” Fogleman said. “So there may be a calculated risk to proceed. This is still being studied.”

Fogleman also cautioned that waiting to sell the bonds also comes with a risk because interest rates could rise in the meantime.

He added that historically, the city has always paid off its higher interest bonds ahead of schedule.

“If we have excess collections we pay off the longer term bonds which in this case would be the taxable bonds because they are at a higher coupon rate,” Fogleman said. “So we could retire them before most of that $650,000 interest accrues.”

Fogleman told the council that he was still waiting on more information from the bond attorneys before they have to made a decision on how to proceed. “Nothing has to be decided

now,” Fogleman said. “You now know what I know. It may play out to

where it won’t impact us.

But I am just alerting you that there may be an additional cost to us depending on which way we go.”

By Mark Randall