With recent jump in bond interest rates, Hillsboro council delays some refinancing

The city of Hillsboro won?t be saving as much interest money as it thought it would two weeks ago. At least not yet.

Because of a recent jump in the interest rates for municipal revenue bonds, the Hillsboro City Council delayed action on one refinancing proposal at its Nov. 16 meeting, but did move ahead with a second proposal to refinance some general-obligation bonds.

At its Nov. 2 meeting, J.T. Klaus, the city?s bond counsel, told the council that because of historic low rates in the bond market, refinancing the revenue bonds to build the aquatic center could save the city an estimated $235,000 over the life of the bond.

He also said refinancing five general-obligation bonds issued for various purposes could save the city around $101,000 in interest.

But Greg Vahrenberg, the city?s financial adviser, came to the Nov. 14 with ?bad news? about the impact of the recent interest rate increase on long-term revenue bonds.

Vahrenberg said the historic low rate, which produced a rush of public entities seeking to refinance their bonds, has made investors leery about locking up their money in longterm revenue bonds.

Five years into the payment schedule for the original $2.63 million bond, the council had planned to refinance the balance of $2.12 million over 15 years.

But because interest rates had jumped quickly in just a few days, Vahrenberg recommended the city delay its plan to refinance the aquatic center bonds. At the current rate, refinancing would save less than $100,000, he said, which would not be enough to justify the action.

Vahrenberg recommended that the council wait to see where the interest rate would go, with the hope that it would return to a more advantageous rate for refinancing.

Adjourning temporarily from the council session to meet as the Public Building Commis?sion, the entity that officially issued the bonds in 2005, members agreed to reconsider refinancing once the city would save a minimum of $150,000.

With that decision made, the council moved quickly to approve the necessary city ordinance and resolution to refinance five general-obligation bonds that were authorized between 2000 and 2004 for improvements and refunding.

Vahrenberg estimated the city will save about $87,000 in interest by refinancing the combined remaining principal of $1.855 million.

Mayor Delores Dalke thanked Vahrenberg for recommending that the council delay refinancing the PBC revenue bonds.

?Some companies would have let us go ahead and do it and collected the check,? she said. ?I feel like we have a real financial adviser.?

Policy revisions

The council approved revisions to two city policies.

The revision to Policy 26 would prohibit city employees from using all city-owned facilities for personal use outside of public-use hours.

The original policy had pro-bited personal use only of the city shop.

City Administrator Larry Paine said the city?s Safety Committee had recommended expanding the prohibition because of insurance liability issues.

Councilor Bob Watson asked if that meant aquatic center employees could not swim in the pool during their lunch break, when the pool is closed to the public.

Paine said technically that would be correct, but the reality is that pool employees generally choose to get away from the sun?s rays during that break.

The second policy revision approved by the council will raise the cost of the city mowing a residential lawn from $50 to $200 when a property owner allows growth to exceed the safety code.

Paine said the $50 charge is not far from what a private lawn service might charge a client these days, and the city needs to set the fee at a level that might provided ?incentive for the property owner to maintain (the lawn) himself.?

Councilor Kevin Suderman asked how many people who are charged the fee actually pay it.

?There are people who don?t give a rip and just let it go,? Suderman said.

Paine responded that if the fee is not paid within the allowed time, the charge is assessed to the owner?s property taxes.

?We get it eventually,? Paine said.

Other business

In other business, the council:

? issued League of Kansas Municipalities service awards to three city employees and two council members. David Funk was recognized for 10 years with the police department, Dan Kinning for 15 years with the police department, Mona Hein for 20 years in the office and Shelby Dirks and Byron McCarty for eight years as a council member.

? joined resident Gari-Anne Patzwald in congratulating Paine for receiving the Buford M. Watson Jr. Award for Excellence in Public Manage?ment from the Kansas City/County Manage?ment Association during the organization?s recent annual conference.

A public presentation of the award by the KCCMA is planned for 2 p.m. Thursday, Dec. 16 at city hall.

? approved the mayor?s appointment of Tom Stoppel to the Hillsboro Recreation Com?mission board.

? established a public hearing for 4 p.m. Dec. 21 regarding several amendments to the 2010 budget in order to meet state budget requirements.

Paine said such amendments are routine adjustments for unanticipated variances in the original budget numbers. He added, ?I?m not disturbed by any of the numbers.?

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