Trust me I’m not celebrating the stock market decline and the impact it’s having on our 401Ks but the last few days and the timing of Minnetrista’s General Obligation (G.O.) bond issue for the water tower was nothing short of serendipitous for the city. When stocks decline investors run toward government bonds for stability and this week’s market drop spelled for a great bond deal for Minnetrista.
Last night the council approved $2,390,000 in G.O. bonds with $1,910,000 going toward the new water tower and $480,000 for capital equipment. With the cash incentives offered by investors we were able to lower the amount of the bond by $125,000 and got an excellent interest rate of 1.622%.
I had previously expressed concern about issuing G.O. bonds for building a water tower because they pledge the full faith and credit of the city when the intention is, and always has been, for water revenues (and only water revenues) to pay for 100% of the debt service on the water tower. G.O. bonds actually mandate that if city water revenues don’t keep pace sufficiently to pay the debt that the city must levy for it. That still concerns me and I would’ve preferred to have issued a revenue bond instead where the investor takes that risk instead of taxpayers. A revenue bond may have seen as good of an outcome as the G.O. bond did yesterday, but I was outvoted and accept that.
Given the great bonding deal we got yesterday I decided to vote to approve it. The reduction of $125K in the bond and the excellent rate we received mitigates, in my opinion, some of the risk factors involved in meeting the debt payments.
I abhor profiting from misfortunes but if a silver lining can be found in the recent stock market volatility I’m grateful that at least there is a benefit to Minnetrista, if not my 401K.