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City Manager Hamilton Announces Savings Through Bond Refinance

August 18, 2014 11:25 AM

City Manager Shawn Hamilton announced the savings today in anticipation of the closing of the $7.6 million tax exempt offering by the City on Tuesday.  The bonds were offered at a public sale on August 4 and were awarded to Sterne Agee of Birmingham, Alabama with an interest rate of 2.50%.  Sterne Agee, founded in 1901, remains one of the few privately-owned brokerage firms in the country with seven subsidiaries and offices throughout the Southeast, and an Illinois outlet in Lisle.


            The new bonds refund general obligation debt issued by the City in 2004. Those bonds financed the relocation and expansion of the City’s potable (drinking water) pump station and reservoir as part of the larger project of improvements in the Uptown Tax Increment Area.  This debt payment equals approximately 10% of the total annual expenditures in the water fund.  The City Council will factor these water fund savings when they establish rates for 2015 later in the fall.


            The refunding began in late spring and started with a review by the bond rating services.   Moody’s has assigned a “Aa2” rating on the bonds, only two notches from the highest rating available, but they have attached an outlook of “negative” meaning they want to see continued strengthening of the general fund.


            Hamilton stated “We’ve known there were significant savings to be realized, but we needed to show we had turned the corner on the general fund’s liquidity to have a conversation with the rating agencies. We received an affirmation of the “Aa2” rating which is great, and we know what needs to be done to reverse the outlook.”


Moody’s said, “The Aa2 rating reflects the city’s large, wealthy tax base; favorable location within the Chicago metropolitan area; relatively narrow General Fund liquidity that is expected to gradually improve; and modest debt burden with rapid principal amortization.”  They said that one of the strengths of the credit was “Financial operations are expected to continue to improve following substantive changes implemented by the city’s new management team.” On the other side of the ledger, Moody’s said, “General Fund reserves and liquidity are relatively low for this rating category.”


“We’ve made lots of progress restoring the balances to the general fund,” Hamilton said, “but we obviously have more work to do.  The City Council should be commended for the policy decisions over the past few years that have helped begin to restore balances to the General Fund”.  The Uptown TIF has been supported by the City’s General Fund which has in turn drawn down General Fund balances.


The closing tomorrow will allow the City to build a further cushion on cash flow in the water fund, Hamilton said. “We have other refundings to do, but it’s a hugely complicated process, and we’re pleased to be able to accomplish this for the citizens of Park Ridge. We hope to have more to show them in the near future.”

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