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Financial advisers outline $591M valuation, $6.7M sewer note and potential $450,000 refinancing savings
Summary
DA Davidson advised the council that Sheldon's total assessed valuation rose to $591 million, leaving substantial legal debt capacity; refinancing a $6.7 million sewer revenue note could yield an estimated $450,000 net savings over its remaining term after transaction costs, though exact savings depend on market rates and process costs.
DA Davidson representative Steve Scott briefed the council on municipal debt capacity and refinancing options for the city's wastewater treatment plant debt.
Scott said the city's 100% actual valuation is now $591 million, which increases the city's property-tax-supported debt capacity; after scheduled payments the city is projected to have roughly $10 million outstanding on existing general obligation debt going into the 2026'27 budget and about $20 million of unused constitutional debt capacity.
On wastewater financing, Scott said roughly $6.7 million remains on a sewer revenue note tied to the wastewater treatment plant. His preliminary analysis estimates a net lifetime savings from refinancing of approximately $450,000 after transaction costs, which he characterized as a roughly 4.5% net present-value savings (present-value benefit about $33,000 by one method). He estimated refinancing transaction costs in the neighborhood of $175,000 (legal, rating, underwriting and other issuance costs). Scott noted interest-rate assumptions can change daily; a 22-year refinancing example in the discussion showed a projected average rate of about 4% versus the current note's average rate of roughly 4.6%.
Council members asked how the city could structure refinancing: keep the same amortization to lower debt service, shorten amortization to pay the note off sooner (Sam suggested shortening by two years was a plausible option), or include issuance costs in the new financing. Scott said the city had flexibility and that shortening amortization could increase planning flexibility for future capital needs. He also explained that TIF (tax increment finance) proceeds are restricted to TIF-eligible projects and therefore cannot be used to pay the sewer revenue note, though TIF funds could be applied to callable GO/TIF debt that financed TIF-eligible projects.
Scott also reviewed an option to use existing available TIF cash (estimated in the staff packet at about $640,837) to call and retire certain callable TIF-backed GO notes; that would reduce a specific TIF obligation without affecting the sewer revenue note because of legal restrictions on TIF fund use.
No refinancing was approved at the meeting; the council asked staff to continue analysis and to return with refinements, specific terms and scheduling for any required public hearing or official action.
