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Council authorizes bid solicitation for $3.18 million water revenue bond after finance presentation
Summary
After a consultants briefing on the citys five-year financial model, the Kasson City Council voted to authorize staff to solicit bids for a roughly $3.18 million water revenue bond to finance a water tower, while preserving options to use stabilization or utility cash for street projects.
Consultant Mike Rubani briefed the Kasson City Council on the citys five-year financial model and recommended financing the water tower as a utility bond, not a street bond, to secure state credit enhancement and lower borrowing costs.
Rubani described the models structure — projects entered as cash or financed, automatic inflation adjustments for multi-year projects and a menu of revenue streams (taxes, water, sewer) available to cover debt service. He said he had modeled a preliminary levy but advised the council that leaning on water revenues for the water tower could reduce the levy increase from the preliminary figure to a lower level. "I'm going to be advising to not do a street bond. Use all your cash for streets and instead do a utility bond for the water tower only," Rubani said, and explained that a modest state credit enhancement fee could yield several basis points of savings on borrowing costs.
The consultant walked the council through specific projects in the model, including Southwest Cass Reconstruction (with a $5 million state appropriation applied), a wastewater treatment plant project that could reach roughly $10 million on the model horizon, and the water tower, which he said left about $3,180,000 to be financed after grants and cash contributions. He showed forecast graphs for the tax rate, a monthly water bill for a 5,000-gallon user and utility fund reserves; the model assumes a 1.5% annual increase in water revenue, a multi-percent increase for sewer, and a small increase for storm funds.
Rubani also outlined the mechanics of issuing the bonds. He cited the authority for water utility borrowings as "chapter 444," described a competitive sale with a negotiated competitive-sale option, and walked through issuance costs, underwriter discount allowances and call provisions. He used a sample net effective rate for illustration and recommended conservative assumptions ahead of a fall sale. "The authority for water utility borrowings is in chapter 444. No public hearings are required," he told the council.
After discussion about whether to use water cash, stabilization funds or a mix, the council took a formal motion to adopt a resolution to solicit bids for the financing described as the "general obligation water revenue bond 25 alpha" for about $3.18 million. Brian moved; Paul seconded. The motion carried and the council directed staff to proceed with the schedule Rubani outlined for advertising, bidding and presenting results to the council in October.
The vote as recorded in the transcript does not include a roll-call tally of individual votes; the chair announced the motion passed. The resolution includes authorization language to proceed with the negotiated competitive sale and to execute credit-enhancement paperwork if the council approves it.
Next steps: staff will finalize the official statement, pursue the credit enhancement paperwork and return to council with bid results and the recommended award following the October bid timeline.
