On 05/18/2022 the Common Council voted to approve the issuance of $15,530,000 General Obligation Promissory Notes and $11,710,000 Sewerage System Revenue Bonds. This borrowing is an annual thing that the city does and is used to fund the Capital Improvement Plan and utility projects.
During the 05/09/2022 Finance Committee meeting, the committee had received a presentation on the issuance of these bonds and had voted to move forward with it. The rates were locked in on 05/18/2022.
Prior to the Common Council meeting, the Finance Committee held a special meeting to review the final rates for the two issuances. Brad Viegut, a representative from Baird Financial, presented on the two items.
He said that they had offered these notes and bonds to investors nationwide and there was high demand for each of them.
GENERAL OBLIGATION PROMISSORY NOTES
The issue size was $15,530,000 with a 10-year amortization. First interest would be due in 2022 and the first call date was in 2029. All of that was consistent with what he presented to the Finance Committee on 05/09/2022.
Moody’s assigned the note a Aa1 rating which is what they had expected. It’s the second highest bond rating that Moody’s assigns and is a very high credit quality rating.
The final interest rate was only slightly higher than the estimated rate of 3.24% he had included in his previous presentation to the Finance Committee and came in at 3.36%. That was in the face of a continuing upward trend in interest rates even over the last week, and he thought it was a very attractive rate for the city. He noted that they had brought these issuances to the city earlier in the year than the late summer/early fall timeframe they normally bring it. “We’re bringing it because of the trend in interest rates to get this locked in, rather than risk locking it at a much higher rate.”
SEWERAGE SYSTEM REVENUE BONDS
The final issue size was $11,710,000, up from the estimated $11,460,000 that had been presented to the Finance Committee on 05/09/2022. The interested rate had also increased slightly from 3.88% to 4.08%. The reason for the increase from $11.46 million to $11.71 million was because the total source of the funds was comprised of the issue size of the debt plus a bid premium that was paid to the city up front. “That bid premium isn’t known until we finalize the pricing which was done this morning.”
He noted that when they adopted the resolution that night, they would want to reference the $11,710,000 number not the $11,460,000 number.
Moody’s assigned the sewerage system revenue bonds an Aa2 rating which was one notch lower than the General Obligation Promissory Notes. That was a reflection of the pledge of repayment. With general obligation notes, they were pledging their taxing authority which was a very strong pledge. With the revenue bonds they were pledging the capacity of the enterprise [which, in this case I take to be the utility system] to generate revenues/user fees. That also was a strong pledge, but it was not as strong as a tax pledge, hence the difference in ratings.
The committee members had no comments or questions and voted 5-0 to approve each of the issuances.
The Common Council then took those items up during their meeting after the Finance Committee meeting. They also had no comments or questions and voted 13-0 to approve each of the items.
After they were approved, Mayor Woodford took some time to thank Mr. Viegut from Baird for his great work. It was a complicated environment right now to go out and make a bond sale and Mayor Woodford thought he had done a great job. He also thanked Finance Director Jeri Ohman and the Finance Department team for their work on this. They had pushed up the timeline to get these bonds issued in order to get ahead of a couple rate increases. “That is going to amount to real savings for the taxpayers of the city.”
View full Finance Committee meeting details and video here: https://cityofappleton.legistar.com/MeetingDetail.aspx?ID=966110&GUID=C93D4E31-16EF-4822-9083-F008FE70C34B
View full Common Council meeting details and video here: https://cityofappleton.legistar.com/MeetingDetail.aspx?ID=937641&GUID=CA7260FB-60F6-4BC6-ADFA-D4D98C93E204
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