By John Holler Correspondent
There’s never a good time for a government unit to make a significant investment in the construction of a long-term facility, but the combination of Wright County’s high credit rating and the timing of its bond issue for the county’s new Justice Center was a perfect storm of good news.
Chris Mickelson from Ehlers & Associates, the bonding firm retained by the county to conduct the bond sale, said that, thanks to such strong bids and the inordinate num- ber of bids, the county was able to knock more than $2.4 million off the total projected price. Morgan Stanley of New York won the bid with a proposal that included slightly under 3.1 percent interest – well below the projection of 3.25 percent, which will result in the savings of approximately $300,000 a year for the life of the repayment of the bonds from the initial sales projections that were used as the basis for budgeting the project from the county level and $81,000 a year in interest savings.
“The par amount from the bonds was reduced from $47.89 million par amount down to $45.46 million,” Mickelson said. “That’s the function of receiving what it is called. The winning bidder bid a purchase price for the bonds that’s above par, or above 100. The reason why they would do that is we’re still in a low interest rate environment. By using a premium pricing structure, the underwriter is able to use coupons on the bonds that are actually higher than the bonds would yield to the investor.”
The county received a rating of AA+ – the highest Standard & Poor’s rating a county Wright County’s size can realistically expect to achieve – prior to the bids coming out. The high rating is based on the county’s strong economy, budgetary performance and liquidity, low debt and strong institutional framework scores.
That combination of a strong track record and ideal timing led to many more bids than expected and much more fierce competition to get the county’s business.
“Thirteen bids were received as a part of this sale,” Mickelson said. “Any time we receive more than may six or seven (bids), we consider that a good result. The only time I’ve seen as many as 13 was actually Wright County’s sale last year, which received 14 bids.” The bidding was incredibly competitive with all 13 bids coming within 10 basis points of each other, apparently realizing that a Wright County bid would require a strong bid and, as Mickelson put it, would discourage “bottom feeders” from bidding or submitting inflated bids.
The closing date is Thursday, June 7, at which point the funds will be turned over to the county. On the heels of two better than expected bond issues, the board thanked Auditor/Treasurer Bob Hiivala and his staff for keeping the county’s finances in such a strong position. Hiivala said a lot of people have worked together to achieve that success.
“We’ve got a good staff and a good coordinator,” Hiivala said. “Wright County’s in good shape.”
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