Agenda - Council - 08/25/1981 - Laserfiche WebLink

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TO: FROM: DATE: RE: Ramsey Mayor and City Council City Administrator, City Engineer, City Attorney August 25, 1981 Bond Sale for 1981 Projects On August 20, 1981, the City Administrator, City Engineer, and City Attorney met to discuss the status of the present bond market. In review of recent bond sales, it is anticipated that the present interest rate Ramsey can expect on a 10 year bond would be approx- imately 12 percent. As an alternate to a 10 year bond, the City could sell a three year short term bond which is renewable up to six years. The present rate for three year bonds is approximately 10 percent. The following cost comparisons show the difference in assessing a $2,000 unit assessment at various interest rates over six and 10 years. The annual cost for a six year payback is approximately 38 percent higher than a 10 year payback; however, the total cost for a six year pay- back is over 15 percent less than a 10 year payback. COST COMPARISONS ($2,000 Unit Assessment) Interest 6 Years 10 Years Rate Annual Monthly Total Annual Monthly Total Cost Cost Cost (6 yrs.) Cost Cost Cost(i0 yrs. ) 10% $459.20 $38.27 $2,755.20 $325.40~ $27.12 $3,254.00 11% $472.80 $39.37 $2,836.80 $339.60 $28.30 $3,396.00 12% $486.40 $40.53 $2,918.40 $354.00 $29.50 $3~540.00 13% $500.30 $41.69 $3,001.80 $368.60 $30.72 $3,686.00 Assume construction'bids come in at approximately 15% below estimate. This would reduce the unit cost to $1,700. By using short term bonding for six years at a rate of approximately 10% and assessing the project at 11%, the annual cost would be $401;88 or $33.49/month. The total cost over six years would be $2,411.28. At an assessed rate of 13% over 10 years, the annual cost would be $313.31 or $26.11/month and the total 10 year cost would be $3,133.10. However, if bids are rejected and the project is delayed until next spring, the bids would probably come in at the current estimated cost or a unit cost of $2,000.00. To equal th~ annual cost at this years estimated bid prices, the bond rate would have to drop below nine percent.