MONROE - The City of Monroe Common Council took steps Wednesday to save about $235,000 in interest costs over the next 17 years by refinancing $3.98 million of Tax Increment District No. 7 bonds originally sold in 2009.
Greg Johnson, an advisor with Ehlers, the city's financial advising firm, discussed the TID 7 rebonding options with the Finance and Taxation Committee on Wednesday.
Johnson informed the city about a month ago that refinancing would save the city $345,000 over the next 17 years.
On Wednesday, he cautioned that many market factors are in play right now that have and could continue to reduce that savings, including a recent bond sale glut on the market without an increase in demand to buy.
Based on the current market conditions and a quarter of a percent increase in interest rates, the city now expects to save $235,000. However, the time from authorization to sale is about a month, and market rates could continue to rise.
To maximize the city's savings in refinancing, the committee opted to use a "parameters" method for the sale, which allows city officials to take action, within limits, at the appropriate time, based on Ehlers recommendations. Johnson said the minimum savings his firm would recommend is about $200,000; anything less, and city officials would halt the issuance process.
Committee members like the parameters options, mostly because of its stop-gap measures and the ability for quick action in the current volatile bond market that is causing interest rates to rebound.
The Common Council voted 8 to 1 to authorize that action at its meeting Wednesday. Alderman Michael Boyce voted against the refinancing, which he says does not solve the underlying problem.
With the downtown tax increment district bringing in less than $50,000 in tax revenues annually, the city will still be funding an average annual shortfall of about $230,000, even under the new refinancing, he said.
"We spent about $60,000 to save $200,000," he said, because refinancing expenses will total about $39,000 and the underwriter's discount will cost another $39,000 maximum.
"The net saving, $140,000 over the next 17 years, is small savings compared to the debt burden," he added.
Boyce said he would prefer to see the city pay off the entire pending debt - about $3.8 million - in TID 7, thus spreading the liability over the entire city and saving $1.5 million total or more.
Under its current status, the accumulating interest on the original bonds will total about $2.2 million over the next 17 years.
"The significance of that (method) is an increase of $45,000 flowing back into the TID that BID and Main Street could use," he said.
Finance and Taxation Committee members have discussed the possibility of paying off the debt, but doing so would require the city to dip into its funds reserved for disasters, which they refused to do.
Boyce contends that the city has "plenty of cash to pay the TID 7 debt in full." Deciding which cache the money comes from is just "a shell game," he said. "In the end, the taxpayers are the ones who foot the bill."
"If TID Seven isn't a rainy day, there is no such thing as a rainy day," he added.
Boyce estimated that the TID needs to generate $900,000 annually in net new development for the next eight to 10 years to become self-sufficient and carry its own debt and interest payments.
Until that happens, the city continues to carry the debt shortfall, and in the meantime, the downtown Business Improvement District (BID) and Main Street Monroe have no income to work with, he said.
BID levies taxes in the district to generate revenue to provide its portion of support to Main Street Monroe, and the city levies taxes city-wide to pay its portion, each about $25,000 a year.
Funds from the original 2009 bond sale went for the downtown Square reconstruction and streetscape project "primarily to install water, sewer and streets," infrastructure - costs which are are "typically spread across the entire city instead of one separate area," Boyce said.
Greg Johnson, an advisor with Ehlers, the city's financial advising firm, discussed the TID 7 rebonding options with the Finance and Taxation Committee on Wednesday.
Johnson informed the city about a month ago that refinancing would save the city $345,000 over the next 17 years.
On Wednesday, he cautioned that many market factors are in play right now that have and could continue to reduce that savings, including a recent bond sale glut on the market without an increase in demand to buy.
Based on the current market conditions and a quarter of a percent increase in interest rates, the city now expects to save $235,000. However, the time from authorization to sale is about a month, and market rates could continue to rise.
To maximize the city's savings in refinancing, the committee opted to use a "parameters" method for the sale, which allows city officials to take action, within limits, at the appropriate time, based on Ehlers recommendations. Johnson said the minimum savings his firm would recommend is about $200,000; anything less, and city officials would halt the issuance process.
Committee members like the parameters options, mostly because of its stop-gap measures and the ability for quick action in the current volatile bond market that is causing interest rates to rebound.
The Common Council voted 8 to 1 to authorize that action at its meeting Wednesday. Alderman Michael Boyce voted against the refinancing, which he says does not solve the underlying problem.
With the downtown tax increment district bringing in less than $50,000 in tax revenues annually, the city will still be funding an average annual shortfall of about $230,000, even under the new refinancing, he said.
"We spent about $60,000 to save $200,000," he said, because refinancing expenses will total about $39,000 and the underwriter's discount will cost another $39,000 maximum.
"The net saving, $140,000 over the next 17 years, is small savings compared to the debt burden," he added.
Boyce said he would prefer to see the city pay off the entire pending debt - about $3.8 million - in TID 7, thus spreading the liability over the entire city and saving $1.5 million total or more.
Under its current status, the accumulating interest on the original bonds will total about $2.2 million over the next 17 years.
"The significance of that (method) is an increase of $45,000 flowing back into the TID that BID and Main Street could use," he said.
Finance and Taxation Committee members have discussed the possibility of paying off the debt, but doing so would require the city to dip into its funds reserved for disasters, which they refused to do.
Boyce contends that the city has "plenty of cash to pay the TID 7 debt in full." Deciding which cache the money comes from is just "a shell game," he said. "In the end, the taxpayers are the ones who foot the bill."
"If TID Seven isn't a rainy day, there is no such thing as a rainy day," he added.
Boyce estimated that the TID needs to generate $900,000 annually in net new development for the next eight to 10 years to become self-sufficient and carry its own debt and interest payments.
Until that happens, the city continues to carry the debt shortfall, and in the meantime, the downtown Business Improvement District (BID) and Main Street Monroe have no income to work with, he said.
BID levies taxes in the district to generate revenue to provide its portion of support to Main Street Monroe, and the city levies taxes city-wide to pay its portion, each about $25,000 a year.
Funds from the original 2009 bond sale went for the downtown Square reconstruction and streetscape project "primarily to install water, sewer and streets," infrastructure - costs which are are "typically spread across the entire city instead of one separate area," Boyce said.