Public hearing set

During past meetings, the Denison City Council and city staff have been discussing the bonding needs for fiscal year 2024-2025 and are proposing an amount not to exceed $4 million.

A public hearing has been set for the February 20 council meeting.

The approval of the bond issue does not mean the city would use all of the funds. Use of the funds will have to be approved by the city council for the individual projects as they arise.

The bond resolution is divided into three sections, according to the type of work.

One section of the bond is for an amount not to exceed $3.4 million. This is proposed for the Washington Park new playground project ($1.3 million), about $1.8 million proposed for streets, and for streetlight equipment and for airport improvements.

The second section is for an amount not to exceed $265,000 for the construction, furnishing and to equip the Crawford County Wellness Center. This amount is a pledge from the city to the project, rounded up.

The third section is for essential purpose bonds in an amount not to exceed $365,000 to replace the indoor and outdoor filters at the aquatic center.

At its January 2 meeting, the Denison City Council provided direction to Scott Stevenson with the DA Davidson office in Des Moines to proceed on the premise that the city would bond for $4 million in fiscal year 2024-2025, while noting that they may not necessarily use the entire amount.

Stevenson said $4 million is the maximum that the City of Denison can bond without increasing the debt service levy. In fact, that levy would decrease slightly, he added.

By bonding for that maximum, the city could reinvest the money and earn interest at a rate above the borrowing rate.

Proceeds from the bond don’t have to be spent until three years from its issuance.

Stevenson said the interest rates on municipal bonds had come down in the last 45 days (as of the January 2 meeting), and the city could probably borrow for a 10-year period for slightly over 3%. He added that number had been perhaps closer to 4.45% just at the end of October.

“You have three years to spend the money. I don’t know if you should go into it thinking we’re going to sit on the money for three years. Right now, you could reinvest it with IPAIT (Iowa Public Agency Investment Trust) and get 5% while you’re borrowing at 3%,” Stevenson said.

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The city has more than enough needs to use the entire $4 million, but the city council members did not necessarily want to spend $4 million in bond proceeds in the coming fiscal year.

One reason the city could bond for $4 million for FY 2024-2025 is the debt that is to be retired at the end of the current fiscal year on June 30 will be more significant than the debt that rolled off last year.

In addition, the taxable valuation for the city is going to grow by about $23 million, about a 10% boost in tax base, Stevenson told council members.

“The city has had a very consistent practice of borrowing over only a 10-year period and doing that consistently, so almost every year you have some debt rolling off,” said Stevenson. “So going forward you maybe have a smaller window of what you could borrow next year, but nonetheless you would have a drop off in that existing debt service burden that you could backfill again with another borrowing next year.”

Councilman Greg Miller asked if the city would affect its bond market rating with a $4 million bond issue.

Stevenson responded that the city’s total outstanding debt is just under $10 million, including the $4 million concept.

“That’s utilizing only 50% of the city’s debt limit, so comparatively speaking, I have plenty of other clients the same size of Denison that regularly are at 75% or 80% of their debt limit utilized, so even with this, it is still a relatively low debt burden compared to your peers,” he said.

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