Grand Marais city councilors voted Oct. 26 to pay off the city’s 2005 refunding bond early, an action that is expected to save $154,000 in interest fees over the next decade.
City Administrator Mike Roth made the recommendation to pay off the bond with a $655,000 payment in February, rather than refinance the $875,000 bond for a second time. Estimates by the city’s financial advisor, Ehlers Associates, indicated that the city would save about $67,000 through the latter option.
The bond was originally a 2000 improvement bond that was needed to finance reconstruction of sewer collection lines.
In order to come up with the final payment, the city will use money from its sewer fund, general fund and debt service fund. The annual bond payment is currently made up of $35,000 from the sewer fund; $49,908 from the property tax levy; and $9,500 from debt service reserves from past special assessment payments.
By eliminating the bond payments, the money can go toward other planned projects. Roth said the city has some pretty healthy fund balances and pointed out that if council chooses to undertake any large-scale capital projects, the city has always opted to borrow money for those anyway, rather than using cash on hand.
While there are no definite plans for any such projects, Roth said he anticipates that the next big one will be a public works facility, which will probably be over $1 million. Other items on the long-range list include things from the park Master Plan such as the community connection, a city hall project, a few street improvements, and some major vehicle purchases such a street sweeper and fire tanker. None of those projects or purchases have been considered recently by council, and Roth said none of the savings will be realized until the 2013 budget because of a “delayed effect” — funds needed to repay the bonds will still come out of the 2012 budget.
No other business came before council, and there were no council or staff reports.
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