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Better bonds terms save city $1.7 million

VALLEY — The Valley City Council on Monday took a three-step process that will result in better terms for its bond financing. Collectively, the action will save the city $173,000 over the next six months and an estimated $1.7 million over the life of a new bond. The city took advantage of low-interest rates and good terms for future financing.

The new terms mean that all the city’s financing is at an interest rate of less than 2.5 percent for periods of no more than 15 years.

“I never thought I’d see that in my lifetime,” said Mayor Leonard Riley.

“It’s a chance for the city to get some really good rates for a long period of time,” AuburnBank representative Bruce Emfinger told the council.

A public hearing preceded the regular council session to allow anyone to ask questions about what was being done. With no one there to do that, the council took action in the regular session to go ahead with the plan.

The first step was to adopt what state law calls Amendment 772. This allows the city to take advantage of its higher than 50 percent debt limit for economic development purposes. Step two is the approval of an ordinance authorizing a taxable warrant. This permits the city to borrow money from AuburnBank to refund its existing Series 2014 Warrants for interest rate savings.

Federal tax rules prohibit the city from refunding its 2014 warrants with tax-exempt proceeds before December 2020. Because of this, the city restructured the transaction with two independent warrants, one that’s taxable and one tax-exempt, both for the full amount of the proposed bank loan.

Both warrants are authorized with only one being outstanding at one time. The taxable warrant will be issued once validation is completed and will be outstanding for a short period of time before the tax-exempt warrant is issued to take its place. The tax-exempt warrant will be issued in February. Such a structure complies with federal tax rules and prevents unfavorable accounting treatment of the loan in the city’s upcoming audit.

The third step authorizes the tax-exempt warrant. This ordinance allows the city to convert the loan to the more favorable tax-exempt rate upon the satisfaction of requirements under federal tax regulations.

In the event of a future possible legal challenge, the city is prepared to seek judicial validation of both the taxable and tax-exempt warrants in circuit court.

“If there is a challenge, we will seek the approval of the circuit judge,” City Attorney John Ben Jones said. “We don’t expect anyone to challenge it but if they do, we believe we are on solid legal ground.”

Riley is pleased with the refinancing.

“It’s a lot less expensive for us to go this route than with other routes,” he said. “We are doing this long term and getting maximum benefit from it.”

Riley said the council will be considering raises for city employees at its next meeting on July 13. What’s being considered is a three percent increase for full-time employees and a two-percent increase for part-time employees. In part, these increases will cover the costs of retirements, something that’s costing the city an estimated $150,000 this year.

The mayor said there’s not likely to be many capital purchases in the coming fiscal year budget. Three new police cars will likely be purchased.

“We will make sure we get the order in early,” Riley said.

The city still hasn’t gotten three new police vehicles that have been purchased for the current year.

Chief Tommy Weldon told the council that King Ford had told them the three vehicles had gone through the assembly line at a Ford plant in Chicago and that the city would be getting them within the next 90 days.

This year’s municipal election will be taking place on Tuesday, Aug. 25. Qualifying for the election starts at 8 a.m. on Tuesday, July 7 and will end at 6 p.m. EST on Tuesday, July 21. Qualifying will be taking place at city hall.