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Council approves $2.83 million GO bond for Ninth Street project, sanitary equipment
Summary
The International Falls City Council adopted a resolution to issue $2,830,000 in general obligation bonds to fund the Ninth Street street-rehabilitation project and finance a sanitary sewer Vactor truck; one council member voted no.
The International Falls City Council on Aug. 4 voted to approve a $2,830,000 general obligation bond issuance to fund the Ninth Street rehabilitation project and to finance a sanitary sewer Vactor truck.
The bond sale, explained to council by George Eilertsen of Northland Securities, combines a 20-year financing for the Ninth Street work with an eight-year term for the Vactor truck. Eilertsen said the city’s “true interest cost” over the 20-year term will be 4.39 percent and that bond insurance will increase the effective rating from A+ to AA at an incremental premium of roughly $9,000. “That 2 tenths of a percent on your bond is about $60,000 of benefit,” Eilertsen said.
Council members were told the bond proceeds will fund sewer, storm and lighting sections of the Ninth Street project and the purchase or repayment for the Vactor truck. Eilertsen said the bundle was structured as a general obligation pledge to achieve a lower interest rate than a straight revenue bond and explained that most of the issue will not count against the city’s statutory debt limit because it is supported by non-tax revenues.
Why it matters: Councilors raised concerns about the city’s low reserve levels and the timing of a major financing. Mayor Bridal said the city’s reserves are at about 23 percent versus a locally adopted target of 50 percent and warned auditors had signaled a potential modified opinion absent corrective action. Eilertsen said the rating agency considered the city’s healthy reserves outside the general fund and stable budget performance when assigning an A+ rating.
What council directed and decided: Councilor Gaither moved to adopt the bond resolution; Councilor Holden seconded. The council adopted the resolution; one council member recorded a no vote. Council discussion included requests for staff to provide repayment schedules that separately track the truck payments and the Ninth Street project payments and questions about which revenue streams would cover particular components. Eilertsen said the bonds carry a call date of Feb. 1, 2033, and that about 30 percent of principal will be retired by that date.
Related items and clarifications: During public comment and later council discussion, staff and councilors said parts of the lead-service-line replacement work were bundled with the Ninth Street project to improve unit pricing; the lead-line work and how it will be scheduled were described as a multi-year effort primarily occurring in 2025–2026 with possible carryover to 2027. The Vactor truck referenced in the bond package was described as approximately $300,000 and already acquired; the financing will reimburse the fund that advanced the purchase.
The council was also told that bond closing is scheduled for Sept. 3 and that the financing strategy was discussed in recent committee meetings and in a pre-pricing call with the underwriter.
Council vote and next steps: The resolution passed. Staff (city administrator and finance director) will receive the final bond schedule and provide council with the split payment schedules and revenue sources for internal tracking.
