City puts refinancing on hold

by Emmitt B. Feldner of The Review staff

PLYMOUTH – The volatility in the bond market means the city will back off from a planned debt refinancing for awhile.

City Administrator Brian Yerges told the City Council Tuesday that rising interest rates on municipal bonds has wiped out any financial gain the city might have realized from refinancing $3.87 million worth of Build America bonds first issued in 2007.

“We’re going to sit tight and wait until after July Fourth to see where the markets are at,” Yerges explained. “Potentially, we could bring this back at the last meeting in July. This is a refinancing, so we’re not under any specific deadline.”

The council gave preliminary approval to the refinancing last month, with the proviso that the new bonds could only be sold if the interest rate were low enough to ensure savings over the life of the issue of $180,000 to $300,000 or more.

The refinancing of the BA bonds is possible because, under the current sequestration, the interest rebate paid to the city annually on the bonds, which are currently taxable, was reduced from 35 percent to 8.7 percent.

The reissue would be tax-exempt bonds, at a slightly lower rate, but the rate would have to be below 3 percent to effect a saving for the city. Municipal bond rates have risen to the 4 percent range in recent days.

The council approved the purchase of office furniture for the new Plymouth Utilities Operations Center from JL Business Interiors of West Bend at a cost of not more than $178,415.

Yerges said the plan had been to purchase the furniture last summer when the center opened, but that got delayed.

Proposals were sought this spring and, of the six submitted, JL was the lowest, according to Yerges.

He noted that Plymouth Utilities has money set aside for the purchase in its original construction budget.

Layne Christenson Co. of Pewaukee was awarded a contract to drill the city’s next drinking water well at a cost of $178,415.

Director of Public Works Bill Immich noted that this will be the first phase of putting the new well – to be located on County Z west of the reservoir - into service, with the total budgeted for $1.25 million.

The projection is that the well will provide 550 gallons of water per minute once it’s fully operational.

The work is contingent on approval by the Department of Natural Resources, Immich added.

The well is within one-mile of Ben Nutt Creek, and it still must be determined if the amount of water that will be pumped out of the well will impact the flow of the creek, he said.

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