Kiel council approves $4.3 million general-obligation notes; sale yields 4.35% true interest cost

The Kiel Common Council on Tuesday approved Resolution 2025-4 authorizing the issuance and sale of $4,300,000 in general-obligation promissory notes, Series 2025A, to fund planned capital-improvement projects.

Joe Murray, the city’s financial advisor from Eller’s, told the council the note sale drew three bids and produced a true interest cost of 4.35%, slightly higher than the team’s 4.28% projection. "The true interest cost flow bid came in at 4.35%. That is 7 basis points higher," Murray said.

The difference added roughly $13,807 in interest over the 20-year term, Murray said, and will raise the debt-service portion of the property-tax rate by about 7 cents from the projection used in the budget planning. "We had projected it was going to increase your debt service tax rate by 50¢, from $1.62 per $1,000 of equalized value to $2.12. The bids came in and it was going to go up to $2.19," Murray said. Murray also told the council that, on an average $300,000 home, the change increases total interest paid over the 20-year life of the issue by about $58.

Murray said the winning bidder purchased bond insurance at its own expense, which provides investors an insurer-backed guarantee and resulted in a double-A assurance from the bond insurer. "By also getting it insured, there's a secondary effect of getting the the factor rating effect of the bond insurers," Murray said. He added the city is not rated by a national ratings agency and had not sought a rating because of its size and infrequent borrowing, but the market sought additional assurance.

Council members asked whether the city could refinance the debt later. Murray said refunding is possible after an initial lock period: "You can refinance it in 10 years… You are locked in for 10 years." A council member asked whether staff would monitor refunding opportunities; council staff confirmed they regularly monitor market conditions and would present options if refunding became cost-effective.

Motion and vote

A motion to adopt Resolution 2025-4 was made by Council member Krieger and seconded by Council member Broeker. The council approved the resolution by roll call, 5-0 (Jill: yes; Broeker: yes; Schutte: yes; Traeger: yes; Krieger: yes).

Why it matters

The note sale provides cash for the city’s next round of capital projects. Although the rate came in modestly higher than projected, Murray said the sale expanded the funds available for capital work and preserved the city’s flexibility to allocate proceeds among projects.

What the council decided next

The council took no further immediate action beyond approving the sale. Murray thanked the council and left the meeting.