As the Redwood County Board of Commissioners continues to talk about its plan to erect a new justice center, one of the issues it still needs to decide is how it will pay for that project.
Teri Heaton and Doug Green of Bakertilly Municipal Advisors attended the board’s Aug. 6 meeting to talk about the financing and to present some of the options the board has as it moves ahead with the plan.
In the end, if the county board commits to the proposed project it’s going to have to borrow money to pay for the multi-million dollar proposal. Those dollars would come as general obligation capital improvement plan bonds.
According to Green for the county to qualify for those capital improvement plan bonds it must approve a five-year capital improvement plan. A public hearing must also be held to discuss that five-year plan. That meeting is scheduled to be held Aug. 20.
The county currently has a debt service levy, which in 2019 is $555,000. In 2024 approximately half of that debt service will be reduced as one of its bonds will be paid off, with the second portion complete in 2028.
Over the next several weeks, the county board will be discussing its financial decision regarding the possible sale of bonds, and Heaton and Green said now is a great time to borrow money as the interest rates are low.
The county currently has a bond rating of AA2, which makes it attractive to the market.
How much money the board will decide to bond for if it proceeds with the project will be determined by the amount of cash on hand it uses. The more of its existing cash that is used the less the bond will be and the lower the amount for which it would have to levy.
The board could also work a scenario where the levy amount is lower in the initial years as the other debt service is paid off. However, in the long run that could mean paying a higher interest rate on more of the money down the road.
Should the board move quickly, Heaton said it could approve the bonds yet in 2019 with the levy set to be paid for the first time already in 2020.
As an example, if the board would borrow $10 million for the project it would likely pay in the area of $3 million in interest over the life of a 20-year bond.
With a potential net levy for the first year of $1.235 million, a home valued at $200,000 would see an increase in its levy of $34.
No decisions regarding financing were made during the meeting.
In other action, the county board:
• Accepted the resignation of Keith Berndt, county engineer, effective as of Aug. 16.
• Awarded a land rental bid of $152.50 per acre from Tom Morley for a nine-acre parcel. The agreement is for three years at that price.