Nevada County Picayune and Gurdon Times Newspaper Archive

Council passes ordinance

Stephens, Inc. will be handing the bond issue for the City of Prescott's water plant renovation.

Carey Smith, a Stephens representative, spoke to the Prescott City Council at its regular monthly meeting Monday, July 16.

He said there were several options the city had in the way of financing the project, with the council having already voted to raise the water rates to pay for the bond issue.

The new water rates are scheduled to go into effect Aug. 31.

The city's repayment plan for the bonds will be 20 years, at an expected rate of 4.95 percent. However, Smith said this figure is based on today's interest rates, and could change.

The change could come sooner than expected as Alan Greenspan, federal reserve chairman, has said the economic slowdown is worse than expected, and may lower the prime lending rate again.

Speculation is the rate could be lowered anywhere from a quarter to half a point this time.

Such a drop would mean the city would be paying back less interest on the bond issue.

According to Smith, the amount the city will have available for the project is $1.1 million, with the bonds to be sold for $1,205,000 and paid back over 20 years.

But, he said, the city will have the option of paying the bonds off entirely with no penalty, if it can, after five years.

The annual payments the city will be making on the bonds is expected to be around $97,000.

Smith said 4.5 percent of the total bond issuance will be used to pay for the costs involved in issuing them. This is similar to closing costs when buying a home, and includes all fees.

Revenues from the city's utility system (electricity, water and sewer), have been pledged as security for the bonds.

Smith's time line for getting the bonds issued and sold began at the meeting with the adoption of a resolution naming Stephens the underwriter.

A preliminary official statement (POS) for the bond counsel will be issued by July 30, with comments on the first draft due by Aug. 2.

Notices of a public hearing will be published in August, with the hearing to be held in August.

At the August council meeting the interest rates will be discussed more formally, as will where the bonds will be sold.

This will also be when the council adopts a bond ordinance and signs a bond purchase agreement.

The issue will be closed in Little Rock sometime in late September or early October, Smith said.

The city had the option of extending the payments to 30 years, but chose the shorter term to save on the amount interest it would have to pay.

Smith said the interest rates for municipal bonds have been stable the past few months, adding this should hold true for the Prescott bond issue.

"This is a good time to issue bonds," he said. "The rates are near historically low levels and the timing is good. I feel the bonds will be well received in the market with good rates."

According to Smith, the $1.1 million for the city's portion of the bonds should be more than enough to cover the construction costs.