Since taking over as city manager in February, Bryan Whitemyer has been conducting a “global financial review,” scrutinizing the city’s books looking for ways of cost savings for the economically struggling budget.
At the Monday, April 15 Oakdale City Council Meeting, Whitemyer and Ken Dieker of Del Rio Advisors, proposed refinancing city bonds that were sold for three phases of the Bridle Ridge development.
If the city proceeds with the refinancing, it not only would generate a savings for the city that could go toward capital projects, but would have a property tax savings for the Bridle Ridge property owners.
Between 2003 and 2005, Oakdale issued three series of bonds to generate approximately $9.5 million in funds to acquire certain public facilities of benefit to the Bridle Ridge subdivision. About $8.2 million still remains on the bonds with interest rates ranging between 4.4 to six percent to be paid off by 2035.
With US Treasury rates hitting an all-time low in December 2012, Dieker explained that the municipal market generally moves in lockstep with the U.S. Treasury. With this, Oakdale has the chance to refinance outstanding bonds to generate the savings for property owners but also create future capital funds for the city.
The reduction to the property owners would only be $18 to $35 a year, depending on the phase the home was built, and about $23,000 per year to the city. The city’s reduction, about $600,000 for the life of the bonds, has to go toward capital projects for the zone.
“Time is of the essence to take advantage of the current market,” Dieker said.
He further explained that the city had the chance for “private placement” where financial institutions would purchase the bonds. According to Dieker, there would be a slightly higher interest rate than the public offering, but lower administrative fees such as no underwriter, trustee, or disclosure fees.
“At the end of the day, aren’t we increasing the principal amount owed?” asked Councilman Don Petersen.
Dieker replied that the increase in principal was “very slight,” but the overall savings was far more.
Councilman Mike Brennan voiced his displeasure of the associated fees paid to those involved with the refinance and wanted a detailed amount of the charges for the processing.
“These guys just use drawn up boiler plates and plug in some numbers,” Brennan said. “I’ve never been happy with consultants. We’re at their mercy.”
Councilman Farrell Jackson also said he would like to see the detailed costs and asked if there was any downside if the bonds don’t get sold.
“I’m still feeling the sting of the wastewater treatment bonds,” Brennan added.
Dieker explained that part of the preparation would be to examine the purchase options but that it would be absorbed by his company.
The council voted 4-0 with Councilman Tom Dunlop absent to proceed with the study of the bond refinancing.
“This is a win-win that benefits the property owners and the city,” said Dieker after the meeting. “You don’t get many of these, so it’s positive.”