Corcoran saves $70,000 in utility bond interest costs

Bond rating upgrade makes savings possible

Corcoran taxpayers got good news Thursday, July 24, in the form of a 3.3 percent true interest rate on the city’s sale of $3.14 million of general obligation utility revenue bonds.

Prior to the sale, Northland Securities, Corcoran’s financial advisers, had projected a true interest rate of 3.49 percent, according to City Administrator Brad Martens. He estimated that the more favorable 3.3 interest rate will save the city $70,000 in debt service costs over the 20 year life of the bonds.

Martens announced bond sale results at the Thursday, July 24, Corcoran City Council meeting. The council approved the bond sale and also conducted other business. Here are some meeting highlights related to the sale, water and sanitary sewers.

BOND SALE

The bond sale is providing $2.8 million for water and sanitary sewer infrastructure to serve Ravinia, the Lennar single-family housing development that will be located south of Corcoran Lions Park and west of County Road 101. Ravinia will be Corcoran’s first subdivision to be served by municipal water and sanitary sewers.

Corcoran has approved a final plat for 36 single-family homes in Ravinia’s first phase. Lennar has proposed to eventually build 426 single-family detached homes on the 266.57-acre site. The builder is doing grading for the first phase and is looking at having model homes in place for next spring’s Parade of Homes, Martens said.

Another $250,000 from the bond sale is enabling Corcoran to complete work on public works facilities, including asbestos abatement and demolition of one of the buildings at the old Caine Road public works site.

Martens attributed the favorable interest rate on the bond sale to an upgrade by Moody’s Investor’s Service in Corcoran’s bond rating from A2 to A1.

When Moody’s announced the bond rating upgrade on July 17, the firm’s financial analysts said that one of Corcoran’s challenges is “small general fund reserve balances.”

Martens said Corcoran has been following a financial plan for the past five years to address this situation. Reserve funds are important because cities use them to pay bills during the first part of each year while waiting for proceeds from property taxes.

Moody’s analysts seemed to notice the improvement in reserve fund levels. They commented: “The city’s financial operations are expected to remain satisfactory over the next three to five years given solid reserve levels and recently implemented financial practices. The city saw surpluses in fiscals 2012 and 2013, which increased available reserves from a modest $472,000, or 15 percent of revenues, to a solid $961,000, or 28 percent of reserves.”

Analysts also said Corcoran has the potential to improve its bond rating with Moody’s, if the city has “material increases in General Fund reserves.”

On the other hand, Corcoran’s bond rating with Moody’s could go down. Analysts said reasons would be declines in general fund reserves, operational challenges or cost overruns related to the city’s water and sewer system expansion, and multi-year declines in property values.

CITY BUDGET

After the City Council approved the bond sale, councilors reviewed a draft of the 2015 city budget. Comments from the Moody’s analysts affected the council discussion. Councilors noticed that the proposed budget did not include an increase in reserve funds.

Then they asked what budget items could be cut so that additional money could be shifted to reserves. One possible cut would be the proposed videotaping of council meetings. Another potential cut would be the proposed creation of a new city staff position, assistant to the city administrator.

Martens said city staff has been working on the 2015 city budget since May. The council and staff will continue to refine the budget through the end of the year. Corcoran is required to set its preliminary general fnd budget and property tax levy in September. By the end of December Corcoran is required to certify its final 2015 budget and property tax levy. The final figures can be equal to or lower than the preliminary figures — but not higher.

SEWER, WATER ORDINANCE

In related business, the council approved an ordinance regulating public sanitary sewer and water within Corcoran. The ordinance spells out who will be required to pay for these utilities, exactly what the utility users will pay for and related regulations. With this ordinance in place, Corcoran has a regulatory structure for dealing with water and sewer customers in the new Ravinia development.

The purpose section of the new ordinance says: “Priority for extending service is new development and the existing downtown commercial district. It is not the intention of the city to extend service and require connection of existing residential or agricultural properties unless requested as referenced in this ordinance.”

Under the ordinance, new development will pay one set of trunk line availability charges per acre.

Existing developed residential property, commercial property and unimproved land will pay one set of trunk line availability charges regardless of acreage. This would happen within 30 days notice from the city that a trunk line is available to the property. Collection may be deferred and financed for a period not to exceed 20 years.

Contact Susan Van Cleaf at susan.vancleaf@ecm-inc.com

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