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Finance director outlines bonding options; model shows roughly $17 million capacity under current assumptions
Summary
Township finance director Lorna Nancherini briefed the DDA on municipal bond mechanics, advisory roles, IRS timing rules and a modeling example that showed about $1.2 million in annual debt service could support roughly $16.97 million in project financing under a ~3.5% interest scenario.
Lorna Nancherini, Cascade Charter Township’s finance director, gave a detailed primer on municipal bonds and how the DDA might pay for the Tassel Park and related work.
Lorna explained bonds as a series of IOUs sold to investors, then walked the board through the advisers and steps needed for an issuance: bond counsel to provide legal opinions, a financial adviser to act as the DDA’s fiduciary, rating agencies (Standard & Poor’s, Moody’s), and an underwriter or underwriters to purchase and re-sell the issue.
Using the DDA’s numbers, Lorna presented three scenarios and said an estimated annual debt service of about $1.2 million could support a project in the neighborhood of $16,970,000 at roughly 3½ percent interest in her August-modeled example. "Based on what we could afford right now, we could make almost just shy of a $1,200,000 debt service payment. And what that 1.2 debt service payment would get us is a project that's $16,970,000," she said.
She warned of timing and regulatory constraints: bond proceeds generally must be spent within three years per IRS rules and arbitrage limits restrict how much interest the issuer can earn on proceeds while holding them. Lorna also described competitive versus negotiated sales and recommended thorough vetting of bond counsel and financial-advisory firms via RFP/RFQ processes.
Board members pressed on structure and risk. Members asked whether bonds would be callable, how long maturities should run (10, 20 or 30 years), and whether the township would need to pledge additional backing. Lorna said the DDA would likely issue revenue bonds repaid from captured tax-increment (TIF) revenues and she agreed to confirm the precise legal relationship between DDA pledges and township backing.
She emphasized that substantial vetting and consultant work would occur before the board would be asked to approve a resolution. That resolution would include a 'not-to-exceed' interest rate; Lorna gave an example cap of 7.5 percent so the board would not have to reconvene if market rates came in below the cap.
Next steps: staff will continue capital planning, refine project budgets, and engage bond counsel and a financial adviser for formal modeling and structure recommendations before any bond issuance is presented to the DDA for a vote.
