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Finance committee approves parameters to sell up to $5 million in promissory notes to fund roads
Summary
The committee adopted a parameters resolution allowing up to $5 million in general obligation promissory notes, capping underwriting and financing costs and setting a maximum interest rate; Baird recommended timing and an interest-rate assumption to guide issuance.
The Muskego City finance committee voted March 24 to approve a parameters resolution authorizing officials to issue and sell up to $5 million in general obligation promissory notes to fund road projects.
Kevin Mullen, representing Baird's public finance department, briefed the committee on the parameters resolution and market context. "The parameters resolution establishes that you could borrow up to but not more than $5 million for the purpose of those road projects," Mullen said. He described the parameters as caps on costs: underwriting costs not to exceed 1% and combined financing costs (including disclosure and rating counsel) not to exceed 1.5%. He also said the resolution sets a maximum interest-rate threshold (transcript: not to exceed 4.5%) and a minimum net bid provision so sales are not priced below certain net proceeds (described in the draft as not less than about 97.5% of par).
Mullen reviewed recent interest-rate movement and presented a conservative example schedule: the parameters assume a stress estimate of roughly 4.07% interest cost with a working expectation that actual market pricing in April could be closer to 3.57%, depending on conditions. He told the committee Baird expects to assemble disclosure materials and schedule bond-rating calls in the first or second week of April if the resolution passes, and that the mayor and finance director would have authority to approve the sale within the approved parameters and then report back.
Alderman Trader asked whether the parameters resolution functions as a cap on borrowing and costs; Mullen confirmed it does, capping borrowing amount, interest rate and fees. The committee approved the parameters resolution on a voice vote.
The parameters resolution instructs staff and finance advisors to prepare for market entry and authorizes the mayor and finance director to execute the sale if bids fall within the approved caps; the city will return to the committee with final sale details after the transaction.
