Prairie Grove City Council Issues $3.6 Million In Bonds

Older Water Lines To Be Replaced

PRAIRIE GROVE — In a special meeting last week, the Prairie Grove City Council approved an ordinance to issue $3.6 million in sales and use tax bonds for water, sewer, drainage and street improvements.

The city will use proceeds from its 0.75 percent sales tax to pay off the 30-year bond issue. Voters approved extending the sales tax in a September 2011 special election.

Larry Oelrich, administrative services and public works director, said the city was able to sell the bonds for the maximum amount approved by voters because of the current bond market and low interest rates.

“It couldn’t have been a better time to sell bonds,” Oelrich said last Wednesday.

Interest rates will vary from 1.8 percent to 4 percent. The average annual bond payment will be about $210,000. Oelrich said the 0.75 percent sales tax generates about $285,000 annually at the existing collection rate. He noted that the city should pay off the bond issue in 19 years at the current rate.

“We expect there will be growth so it should be paid off sooner (than 19 years),” Oelrich added.

The ordinance authorized $1.5 million for water improvements, $1.3 million for sewer improvements, $400,000 for drainage projects and $400,000 for street improvements.

Oelrich said the city should complete the transaction on March 13 and the funds will be available at that time. The city is required to place $205,243 in a debt service reserve account. After fees and other costs, the following will be available for the construction projects: $1,363,789 for water, $1,181,915 for sewer, $363,679 each for drainage and streets.

The funds will be placed in a separate construction account for each area.

The city will use the bond issue to replace older water and sewer lines, to improve the drainage on Viney Grove Road and to pave dirt roads annexed into the city in 2006.

Oelrich said the water and sewer projects will proceed at the same time, noting “It will be a terrible mess in Prairie Grove for some time and a terrible inconvenience.”

In 1999, Prairie Grove voters approved a three- fourths cent sales tax for a $1.8 million bond issue for park improvements and to build the Prairie Grove Aquatic Center.

The city recently paid off this bond issue. Oelrich said the bond fund still has about $75,000 in it and this will have to be used for other park projects.

In September, voters authorized the city to extend the local sales tax for a new bond issue to fund water, sewer and street improvements.

The sales tax for the water park ceased to exist on Dec. 31, 2011, and the city began collecting the tax for the new bond issue Jan. 1.