MONDAY - An alternative funding source from the federal government could save Monroe hundreds of thousands of dollars on the cost of the Square reconstruction, but awaiting its approval is delaying the anticipated start of construction.
The alternative "worked out best," said Alderman Dan Henke, president of the Monroe City Council.
The City of Monroe will be using a new federally-subsidized loan program with its state trust fund loan to pay for the downtown Square reconstruction project.
In addition, Monroe will be one of the first municipalities to utilize the new Build America Bond program created Feb. 17 by the U. S. Congress.
The City Council approved an application for a State Trust Fund loan on May 19, two weeks after hiring a general contractor for the project, and will not receive confirmation of the loan approval until June 2, at the earliest.
Traditional general obligation bonds were not an option for the city, because it does not have its 2007 audit completed, said financial advisor Greg Johnson of Ehlers & Associates, Inc., Brookfield.
The city is waiting for its 2007 audit to be certified, according to Henke.
Monroe Mayor Ron Marsh said the interest rate may have been a little less by going though the normal bonding process. But waiting to apply for a general obligation bond, after the audit certification, could have been riskier with the current fluctuating interest rates in the financial market, Marsh added.
By adding the Build America Bond program to the State Trust Fund loan to finance construction instead of tax-exempt general obligation bonds, Johnson estimated the city will save about $546,000 over the life of the loan. Without the Build America program, the trust fund loan would cost about $400,000 more than general obligations bonds.
Monroe will receive a 35 percent subsidy on annual interest costs, Johnson said.
"The State Trust Fund loan was the best financing available to the city," Johnson said.
The city applied for a $4 million loan through the State Trust Fund, administered by the Commission of Public Lands under a 20-year repayment plan; the interest rate is at 5.5 percent.
Applying the Build America Bond program, the interest rate effectively becomes 3.575 percent.
Repayment of the loan is expected to come out of the Tax Increment District No. 7 fund starting in 2010. TID No. 7 encompasses the downtown area about two to three blocks surrounding the courthouse.
Marsh said the annual payment, gross principal and interest, will be $169,661.
The Build America Bonds program does contain some risks, according to Johnson.
"The 35 percent interest subsidy could be reduced or eliminated by Congress in the future," he told The Monroe Times on Wednesday.
"There could also be concerns with the timing of the subsidy payment. One advantage of using the State Trust Fund Loan program, however, is the loans can be pre-paid annually. If the interest subsidy was reduced or eliminated by Congress in the future, the city could pre-pay the State Trust Fund Loan by refinancing the loan with tax-exempt debt if interest rates are favorable," he added.
The city will receive confirmation on the State Trust Fund loan from Ehlers & Associates June 2 or 3, Marsh said.
Once the city has funding confirmation, Marsh will give E&N Hughes Company, Inc. the go-ahead to begin construction, Henke said.
"We have to make sure we have the commitment (for the loan) from Ehlers," he added.
The alternative "worked out best," said Alderman Dan Henke, president of the Monroe City Council.
The City of Monroe will be using a new federally-subsidized loan program with its state trust fund loan to pay for the downtown Square reconstruction project.
In addition, Monroe will be one of the first municipalities to utilize the new Build America Bond program created Feb. 17 by the U. S. Congress.
The City Council approved an application for a State Trust Fund loan on May 19, two weeks after hiring a general contractor for the project, and will not receive confirmation of the loan approval until June 2, at the earliest.
Traditional general obligation bonds were not an option for the city, because it does not have its 2007 audit completed, said financial advisor Greg Johnson of Ehlers & Associates, Inc., Brookfield.
The city is waiting for its 2007 audit to be certified, according to Henke.
Monroe Mayor Ron Marsh said the interest rate may have been a little less by going though the normal bonding process. But waiting to apply for a general obligation bond, after the audit certification, could have been riskier with the current fluctuating interest rates in the financial market, Marsh added.
By adding the Build America Bond program to the State Trust Fund loan to finance construction instead of tax-exempt general obligation bonds, Johnson estimated the city will save about $546,000 over the life of the loan. Without the Build America program, the trust fund loan would cost about $400,000 more than general obligations bonds.
Monroe will receive a 35 percent subsidy on annual interest costs, Johnson said.
"The State Trust Fund loan was the best financing available to the city," Johnson said.
The city applied for a $4 million loan through the State Trust Fund, administered by the Commission of Public Lands under a 20-year repayment plan; the interest rate is at 5.5 percent.
Applying the Build America Bond program, the interest rate effectively becomes 3.575 percent.
Repayment of the loan is expected to come out of the Tax Increment District No. 7 fund starting in 2010. TID No. 7 encompasses the downtown area about two to three blocks surrounding the courthouse.
Marsh said the annual payment, gross principal and interest, will be $169,661.
The Build America Bonds program does contain some risks, according to Johnson.
"The 35 percent interest subsidy could be reduced or eliminated by Congress in the future," he told The Monroe Times on Wednesday.
"There could also be concerns with the timing of the subsidy payment. One advantage of using the State Trust Fund Loan program, however, is the loans can be pre-paid annually. If the interest subsidy was reduced or eliminated by Congress in the future, the city could pre-pay the State Trust Fund Loan by refinancing the loan with tax-exempt debt if interest rates are favorable," he added.
The city will receive confirmation on the State Trust Fund loan from Ehlers & Associates June 2 or 3, Marsh said.
Once the city has funding confirmation, Marsh will give E&N Hughes Company, Inc. the go-ahead to begin construction, Henke said.
"We have to make sure we have the commitment (for the loan) from Ehlers," he added.