Municipal Advisor Chris Collier, from Northland Securities, Inc., on Feb. 17, discussed possible funding options for the McBride Development.

“If you look at the total debt that you have outstanding ($934,000), you’ve been very fiscal with that,” Collier said. “Our goal is to keep it as low as possible going forward.”

This outstanding debt is from the Series 2011 bonds that were issued for the city to extend and improve its combined waterworks and sewerage system. Approximately $150,000 per year is being paid on the bonds, with Jan. 1, 2031, being the estimated end of payment. 

Phase one of the McBride development is estimated to cost the city $500,000, which will be paid out of funds that are already on hand and later can be reimbursed back to the city with bond proceeds.

Phase two is estimated to cost about 2.6 times as much, at $1.3 million, which will be funded through bond proceeds.

“And as I mentioned before, payments will be structured around the existing bonds to try to keep it as level as possible for the city,” Collier said. “I also anticipate that the annual payment will be made out of the Capital Improvement fund...and it would not require additional funding, so it wouldn’t require a tax increase from the city.”

Approximate cost breakdown shows that about 80 percent of the expenses for phase one will be electrical, while almost 75 percent of phase two is allocated to water and sewer/the wastewater treatment plant.

For the debt payments, Collier advised to pay a smaller amount on the 2027 series bonds until the 2011 bonds are paid off, and then pay off the rest of the 2027 series bonds with the final payment in 2042 (15 years from issuance).

“We ran different scenarios. We ran a 10-year, a 15-year and a 20-year to kind of show different items. The 15-year right now seems to be the most economic,” Collier said. “It provides the lowest payment with the lowest interest rate, but it also gives you flexibility.”

It is estimated that the payments should stay below $300,000 per year.

“(The) idea is, the current capital improvement fund, I think you’re getting over $400,000 a year in that fund, so that these payments would be made out of that fund, but without anticipating growth,” Collier said. “So obviously growth will help provide additional flexibility.”

Collier discussed the water and sewer rate if it stayed the same.

“Even with a little bit of growth as on the previous page, you’re still going to end up in, you know, some deficits coming in,” Collier said.

He suggested that the city start looking into the next steps, like finalizing their rate study and then adopting a plan to address the possible deficits.

He advised that most cities benefited from gradual increases in rates over a number of years instead of waiting and then having one giant increase.

In the next five to 10 years, when looking at phases three and four, they anticipate needing to borrow $4-$5 million for phase three and $5-$6 million for phase four to complete them.

Collier advised the city of a few things that they should take care of before 2026 ends, including completing their annual audits within 180 days of the end of the fiscal year; reviewing and updating the fund balance policy, transfer policy and debt policy; and completing and approving a new rate study.

“(The) idea really is to build up the city, to get you into a position to be as strong as possible when and if you need to borrow,” Collier said.