Polk County reviews airport bond sale and schedules hearings for county borrowing

Tim, a staff presenter, told the Polk County Board of Supervisors that the airport intends to ask the county to sell a second round of bonds this spring to fund remaining airport projects. "Last year, the county sold a little bit less than $120 million of bonds to fund the first kind of round of projects at the airport," Tim said, and said the airport is likely to request issuance to cover the remaining balance of about $350 million minus last year’s sale (roughly $237.8 million).

Tim said the airport may request two series of bonds issued at the same time — one subject to the alternative minimum tax and one classified as governmental — and reminded the board that a loan agreement between the county and the airport authority requires the authority to provide cash in advance to cover debt service so the county need not levy taxes if the cash is in place. "We have to make sure that the cash is there such that when you approve the budget and don't levy the tax to pay the bond you know you have the cash to pay the bond," Tim said.

The presenter described the expected schedule: a TEFRA hearing under federal tax law would be held by the board on March 11; in May the board would be asked to authorize the official statement describing the bonds to investors and, at a second May meeting, to authorize the sale with not-to-exceed interest rates. Tim said the office expects the bonds to be sold midweek and that funds would be delivered to the airport authority by mid-June.

Tim and other staff discussed the airport’s consultant feasibility report, which the airport provided last year. Tim asked supervisors whether they wanted an updated market/feasibility report before the next sale; he estimated an update would take about four to six weeks. "That report would do" the work of identifying trends in air travel, operational revenue centers and what the airport will need to charge airlines to cover debt, Tim said. Several supervisors said an update would likely be useful if it is a limited, routine update.

Tim noted legal and market constraints affecting the structure of the loan and bonds: the loan agreement is based on a 30-year amortization but Iowa law limits most public bond sales to 20 years, so the county expects a 20-year bond with a balloon payment and later refinancing that could extend payments toward a 30-year schedule. He said current market rates for 20-year borrowing were in the mid-4% range.

Separately, Deb, a county staff member, outlined planned county-purpose borrowing that county staff expect to seek during the budget cycle. Deb said the county borrowing would be roughly $13 million in total, including about $7.5 million for housing commitments (Invest DSM/Housing Trust Fund), $1 million for the sanitary sewer revolving loan fund and the remainder for capital projects such as HVAC updates and jail improvements. Deb described March meetings as the point to set and hold a hearing and to adopt the pre-levy resolution needed to include the borrowing in next year’s budget; county-purpose borrowing would then resume in June and wrap up in August.

The board discussed credit rating considerations, conduit financing and how outside entities’ borrowing (for example, the airport or the Metro Waste Authority) appears in rating agencies’ analyses. Tim said rating agencies treat conduit loans as debt in their calculations and may include those obligations in “below the line” subjective adjustments, but that last year the county’s ratings were maintained despite the airport amount and the team does not expect a downgrade from last year’s outcome.

Board members and staff agreed to follow up: Tim said he would coordinate with the airport on the feasibility update and work with counsel on publication and scheduling of the TEFRA hearing; Deb said she would bring the county-purpose hearing and pre-levy resolution to the March meetings. No formal vote or ordinance was taken during the discussion.