City bonds get better interest than expected
Improvement projects could be paid off in 15 years
Interest generated by a bond sale to fund improvements across Forrest City could benefit taxpayers in the long run after finance officials told members of the city council Tuesday night that the bonds could be repaid a lot sooner than originally anticipated.
Voters approved the bonds during a special one-cent sales tax election in April, and the city will begin collecting the sales tax in October.
"After the election was successful, we went out and have been in the development phase of selling your bonds," Michael McBryde, public finance department vice president with Stephens Inc., told the council. "What we did today is take firm orders for your bonds."
According to McBryde, sales began at 9 a.m. Tuesday and closed at 10:30 a.m., and the company received twice the orders for the bonds than were available.
"We actually received two times the orders for your bonds. So, for the 16 and a half million we sold, we received orders of $33 million, allowing us to get a lot of interest in your bonds, which allowed us to get you a very low interest cost,” said McBryde.
McBryde said that the true interest cost is around 1.84% for the transaction, which is lower than the projected 2.5%.
“We were able to get a much more aggressive interest rate than what projections were," said McBryde.
Because of the lower interest rate, McBryde told the council it allows the firm to shorten the maturity of the bonds to 2044, but reminded them that all excess tax collections would go toward repayment of the bonds and if the city kept with current tax collection trends and showed no growth, the bonds could be paid off in 15 years.
“It is exactly what we talked about, but better because the interest rate is lower," said McBryde, adding that the closing date for the bond sales is set for July 22.
"Which means you'll have money in the bank to go spend and execute the projects you told voters you'd go do on July 22," said McBryde.
Councilman Danny Capps questioned the amount differences listed on the ordinance and ballot, specifically the water improvement issue which the ballot showed would cost $6,550,000, but the ordinance presented by Stephens for the council’s approval Tuesday night showed at $6,205,000.
McBryde also told the council that most bonds were sold at a premium, and due to the nature of premiums, the issue in question was issued at the lower rate but would generate the $6,550,000 needed for projects due to the premium.
“You are selling $100 for more than $100," McBryde said of the premium. “It generates more money and allows us to get that low interest rate we were talking about. All of these issues, except for animal control, were sold with a significant amount of premium in them. Animal control was sold at par, which is one-to-one."
Taylor Marshall, with the Friday Firm, told the council that the premiums allowed the city to sell fewer bonds but still generate the needed revenue for the proposed projects.
"However, we issued the maximum amount to make sure, with the rise of construction costs, to make sure you had enough to get out there and accomplish your projects," said McBryde.
Marshall explained that the ordinance needed to be signed to generate closing papers to meet the July 22 deadline.
He told the council that the funds would be issued to Simmons Bank, the same bank from the 2014 bond issues, and that the city would have 11 separate accounts at Simmons Bank for the different issues.
"This tax will go on the books on October 1, and you, as the trustee of that, will start receiving collections. All of the collections of this tax will go toward your bond trustee," explained Marshall. "The bond trustee will take care of paying of principal,
“It is exactly what we talked about, but better because the interest rate is lower.” – Michael McBryde, Stephens Inc.
(Continued from Page 1) interest and cost that you incur over the life of the bond issue. Then, once your debt services are taken care of, any excess collections will go toward payment of the bond, which is where we are getting the pay down early in May 2036."
The council voted to read the ordinance by title only the required three times. When put to a final vote, councilman Jason Evansingston cast the lone vote against the ordinance.
In other business, the council approved paying bills in the amount of $79,778.43 from general; $12,230.79 from street; $44,389.16 from solid waste and $110,271.25 from water.
Capps asked Forrest City Mayor Cedric Williams to check into labor and parts listed on one bill under the street funds.
Evansingston abstained from voting.
Williams reminded the council that there are several youth activities taking place this summer in the city, including programs with the public library, Juneteenth, ComUNITY Jazz Jam, Forrest City School District and city programs.
"I just encourage everyone to take advantage of these programs," said Williams. "We are asking everyone to be involved with these activities."
Councilman Chris Oswalt announced the council’s personnel committee will meet at 5:30 p.m., Tuesday, June 29, to discuss findings from a study regarding job descriptions and salaries at the water department.