The Prairie du Chien Common Council approved two bids for funding the future public safety building as well as other projects at a special meeting on Tuesday, June 9.
Bids on both batches of notes were taken at 10 a.m., according to Kristin Hanson, director of FPM Financial Associates' Milwaukee office.
The first batch was tax-exempt general obligation notes. The money from the borrowing will be used toward the public safety building, to refund two loans, and to cover the purchases of a fire truck and a dump truck.
The City received five bids on the tax-exempt notes. The lowest bid came from BOK Financial Securities, of Dallas, Tex., through Peoples State Bank.
Other bidders included Northland Securities, of Minneapolis, Minn., and Baird, of Milwaukee.
Hanson said the bidding was "tight" between the five bidders. The interest rate on the winning bid was 3.96 percent, while the most expensive bid was 4.03. "This shows you have interest in these GO notes."
Because the bid was less than originally projected, Hanson said the size of the borrowing was reduced.
"Because we received a premium bid, we were able to reduce the note size from $7.67 million to $7.265 million," she said.
The projected cost over the life of the borrowing was based on five-percent interest. With the lower rate fetched in the bid, the total cost (principal and interest paid for the 20-year lifespan of the borrowing) decreased from $13.2 million to approximately $11.6 million.
"It's a benefit for your taxpayers because it means less capitalized interest," said Hanson.
The ratings call with Moody's helped with the favorable bids; Hanson said the call affirmed the City's A1 rating. "This reflects your solid financial position, which has improved over recent years."
The rating generally identifies an entity as a "very low credit risk" for investors. Issuers are considered strongly capable of meeting financial commitments to their debts.
The City's debt limit is $29 million (five percent of its equalized value), according to Hanson. Even with the new borrowings, Prairie du Chien is still under their limit.
Hanson said the City plans to use capitalized interest to offset payments to debt in 2027 and 2028, and in the two years following that, they will make use of "other funds" to help mitigate the debt's effect on its tax levy.
City Clerk Tina Fuller previously said the "other funds" are money allocated to a debt reserve fund the City maintains. City Administrator Chad Abram added that the borrowing is "structured to wrap around the City's existing debt." He added that the intent is to keep the tax levy under $1.2 million.
The City expects to receive the funds before the end of the month, which will allow the project to move forward.
This past month, the Council awarded the construction contract for the public safety building to Americon Construction Company, of Tomah. The contract is for approximately $10.1 million.
TID 8
The other resolution approval was for $1.37 million that will be used to refinance taxable notes issued in 2021 for infrastructure, site development and developer incentives in a tax incremental district (TID) 8.
TID 8 is a district within the city that includes Prairie Bluffs Court, Eco Cottages and the Pelton Apartment Complex, along with some business properties.
There were two bidders on the taxable notes, with Baird submitting the lowest bid. The interest rate is 5.31 percent.
"Taxable rates are always higher than tax-exempt rates, and we were very pleased to see folks bidding on this," said Hanson.
She elaborated, saying the taxable market has been "a challenge lately." Due to the small issuance size and the maturities being small, there was a possibility that bidders would not be interested.
"Because of the bid you received, we were able to reduce the taxable series down to $1.355 million as well," said Hanson.
She added that the total principal and interest of the second borrowing reduced $163,000 in principal and interest payments over its 20-year lifespan due to the accepted bid.
In attendance were alderpersons Andy Ringgold, Kayla Ingham, Todd Crotty, Bob Granzow, Vicki Waller, Nate Bremmer and Jaaren Riebe. Also present were Mayor Mark Gillitzer, Police Chief Kyle Teynor, City Planner Nick Gilberts and Fuller.
The next meeting is scheduled for July 7.
