Salem Board approves bond issuance for road repairs

At tonight’s Town of Salem Board of Supervisors regular board meeting which was held earlier this evening, the board unanimously approved the resolution authorizing the issuance and sale of $4,060,000 of general obligation promissory notes, series 2013A.

Two representatives from Ehlers and Associates, leaders in public finance, were in attendance at the meeting.  Ehlers is an independent financial advisory company that has served public sector clients throughout the Midwest since 1955.  They took the supervisors and the members of the audience through an 11-page document describing the bond issuance.

Todd from Ehlers said that, last October, several financing scenarios for street projects were reviewed, totaling $3 million.  Additional refinancing opportunities presented themselves, including rates that have increased, providing decent savings.  That’s the reason the amount increased to over $4 million.  The bonds were sold this morning.

Maureen from Ehlers stated that today’s sale occurred at 10 am this morning.  There were eight bidders, and the winner was Raymond James and Associates, at a rate of 1.9702%.  The original sale was to be for $4,120,000, but the final amount yielded $4,060,000.  Sixty-five thousand, eight hundred and twenty-two dollars ($65,822) was the premium offered now in exchange for a higher interest rate to customers.  Incorporating the 2006 and 2009 notes into this sale yielded $23,732 and $25,611 in savings, respectively.

Also included was a four-page rating report by the Standard & Poor’s investment rating service, which affirmed the rating for the town of Salem as “AA.”  Good information regarding the town was also included.

Supervisor Dan Campion asked about the rating of other local municipalities.  “What’s the best rating?”  Todd from Ehlers replied that a top-notch rating is “AAA,” then “AA+,” then “AA.”  Therefore, the “AA” rating is the third highest rating.  The most common is “A+” to “AA.”  “Therefore, the town of Salem is on top of the bell curve and is on the leading edge.”  Once below the “AA” level, a municipality has to pay 1/2% more interest.  This is highly sought after by investors.

Campion also asked what goes into a rating.  Todd replied that there are certain things beyond the control of an organization, like the state of the economy.  One thing that is under the control of the organization is the fund balance, the debt vs. the tax base, and general financial operations.

Supervisor Dennis Faber commented that the maximum indebtedness of the town’s residents is 5% of the assessed value, which has decreased 22% from 2008 to 2011.  “The town’s worth is $986.4 million, and we are $50 million in debt.  We are well below the allowable number,” Faber said.

Campion also asked whether the $50,000 in savings was rolled into the notes.  “What is the advantage?” he asked.  “Will this affect the rating now?”  Todd’s answer was that it was considered when they sought the rating.

Town Board Chairman Diann Tesar called for a motion to approve the resolution for $4,060,000 for the actual sale results from today.  All were in favor.

Campion made a few additional comments for the sake of those in the audience.  The savings were produced by a new refuse and recycling bid of $200,oo0/year, which was approved in April.  This resulted in $3.65 per $1,000 of assessed value.  Instead of $200/household for garbage, it ended up being $160/household.  This will result in an increase of $8 in the tax levy for an average $200,000 home, for $3 million of road repairs. “This represents good savings,” he said.

To read more about the garbage/recycling program, click here:  The Salem Town Board approved a contract with a new garbage and recycling collection company in December.