Northwest Arkansas Democrat-Gazette
Voters to decide if tax will stay
Editor’s Note: This is the last in a six-part series on the proposed Springdale bond issue. For previous stories, visit nwadg.com.
SPRINGDALE — The city has almost $180 million in projects it plans to build if voters approve a bond issue Tuesday. The cost of paying off a 2013 bond issue and financing the new one is the second costliest item among the six ballot questions.
The refinance question must pass for any of the projects to be funded in the next few years, city officials say.
“If that does not pass, the other five won’t matter,” said Springdale Mayor Doug Sprouse at a forum Jan. 30 at the Springdale Senior Center. “We will not be able to generate revenue for other issues. If this does not pass and the others do, we will not be able to sell those bonds. We will leave money on the table.”
The new bond issue will be repaid by extending a 1 cent sales tax for 10 years past its expiration date. Taxes won’t be cut immediately if the issue doesn’t pass. The city is obligated to pay on previous bonds for eight to 10 more years, Sprouse said.
“You’re not going to get away from that 2 percent sales tax anytime soon,” he said.
The four major cities in Northwest Arkansas levy the same amount for capital improvement bonds. Wyman Morgan, director of finance and administration for Springdale, said the first penny goes to the city’s capital improvement fund, paying for items such as street repairs, upgraded technology and new police vehicles.
The second penny repays bonds the city sells for major capital projects.
Springdale residents approved a bond issue and 1-cent sales tax in 2006, Morgan said. That bond issue paid for construction of Arvest Ballpark and Don Tyson Parkway, among other projects.
Voters approved a second
bond issue and agreed to extend the 1 cent sales tax in 2012. The 2012 bonds paid for projects such as the interchange of Don Tyson Parkway with Interstate 49, C.L. “Charlie” and Willie George Park and two new fire stations.
Springdale resident Jack Clark, who attended the forum at the senior center, said he supports the bond issue.
“We got to take advantage of this now. We get all of this for no tax increase,” he said. “It’s absolutely necessary for the city to refinance other bonds. It’s a smart, good way for our city to work.”
In 2013, the city refinanced the 2006 bonds at 4.2 percent interest rate, “which saved the taxpayers $12 million,” Sprouse said at the forum.
If it passes, the new bond issue will pay off the 2013 debt. If not, that issue is projected to be paid in full in 2027. The 2012 bond debts are scheduled to be paid in 2032.
Thanks to the population growth in Springdale, the sales tax revenue dedicated to the repayment of bonds is more than anticipated. The new bonds could be paid off in 15 years rather than 30 if revenue stays the same or continues to grow, Sprouse said.
“That 15 years is only five years longer than the city would repay the bond as it currently stands,” he said.
The cost of construction for all projects proposed for the bond issue totals $179,890,000 million. The construction totals are “up to” amounts, Sprouse said. For example, if construction of a new animal shelter doesn’t cost $5.2 million, but the bonds provide that, any extra money will be used for road improvement.
“We didn’t want to ask for not enough,” he said. “We’re not going to ask for less on a ballot issue than we need.”
The ballot totals $224.6 million, which accounts for various costs in refunding the 2013 bonds and issuing the new ones.
Cost to issue the bonds includes $1.7 million underwriter’s discount; $1.44 million bond insurance premium; $232,000 surety bond for commitment fee; $150,000 to bond counsel; $75,000 to the bond rating agency; $50,000 to bond trustee and counsel. The costs also include a miscellaneous $50,000 to cover expenses such as fees that might come in more than projected or interest rates that are higher than projected at the time the bonds are sold, said Bob Wright of Crews and Associates, the investment banking firm overseeing the bonds for the city.
The projected interest rate the city will pay is 3.87 percent, Wright said. The return for bond holders is estimated at 3.3 percent.
If the bond issue passes, the city can expect to begin selling bonds about July 18, Sprouse said.
“This is coming from the mayor, so take it for what it’s worth,” Sprouse said. “As good as we did with the projects from the last bond issue. We are so much better prepared for this bond issue. We’ve learned a lot.
“Springdale would be a fraction of what it is now without the 2012 bond issue. We would have no Sam’s Club, no children’s hospital, no improvements to downtown. The ability to do those are tied to the 2012 bond.”