City authorizes sale of $3 million bond
BY NAOMI KOWLES
For the Star Journal
The city council moved forward Monday night with a resolution approving a general obligation debt of $3,085,000. The 10-year note will cover just over $2 million in street projects, to be paid back using the Premier Resort Area Tax (PRAT), and about $1 million in city capital projects to be paid back with the property tax levy.
A representative with Ehlers, a municipal financial advising firm, explained how the debt would impact Rhinelander’s current outstanding debt and total debt levy, noting Rhinelander’s total borrowing capacity currently sits at just under $30 million, a number that represents 5 percent of the equalized valuation of the city.
“What we like to see, and what we’ve seen in the last couple years, that [number] goes up a little bit each year as the city grows,” said Sean Lentz, senior municipal advisor.
According to the Wisconsin Department of Revenue, “The annual equalized value of each municipality represents DOR’s estimate of the total value of all taxable property.”
According to documentation prepared by Ehlers, Rhinelander’s current outstanding general obligation debt falls at about $19 million, with $10 million remaining in borrowing capacity.
“With this proposed debt, the city is still in a pretty strong position,” Lentz said. “You still have approximately $10 million in available capacity to use, should other things come up.”
Lentz said for the $2 million being borrowed for street expenditures, the approximate annual payment is $240,000, or about half of the yearly projected PRAT revenue. The tax levy portion to fall into the general fund budget is estimated at about $120,000 a year.
For 2018 through 2020, the amount of debt service payments under the general fund budget to be levied against the tax rates will sit at about $900,000, Lentz explained.
“Starting in 2021 and beyond, that levy portion is set to fall off, and the long-term plan is that the city, every other year, is going to be looking to go back out to the capital and get money for your capital expenditures,” Lentz said. “And the plan is to try to wrap that debt around the existing debt, keep the impact on the tax payers as manageable as possible going forward.”
Lentz said that Rhinelander’s current bond rating is at the A+ level, and that he would be meeting with Standard & Poor’s for a new rating about a week and a half prior to the sale date for the note.
According to the debt issuance schedule put out by Ehlers, official statements for the debt will go out to bidders the week of March 26, and the city council will meet on April 9 to award the sale. The estimated closing date is May 1.
The $2 million for street projects is planned to repair or resurface over 15 miles of Rhinelander roads in 2018.