City officials are preparing to sell a revenue bonds in an amount not to exceed $6,315,000 to pay the principal amounts stemming from two previous debt extensions.
At a recent meeting, the Yorkville City Council held a public hearing to notify the public of intent to issue the new bonds. No one spoke in opposition to the matter.
Finance Director Rob Fredrickson said preparing a refunding bond for sale makes sense for the city money-wise.
“It’s a refunding bond so we hope to reduce our interest and save money,” he said.
The Yorkville City Council approved a series of three ordinances at the June 28 meeting, allowing for the issuance of the revenue bonds, the establishment of a maximum principal amount to be refunded and the scheduling of a public hearing.
The city said revenue bonds differ from general obligation bonds, as they are backed solely by revenue streams for water and sewer, and require a lower rate of interest to be paid on borrowed funds.
The revenue bonds intends to refund the principal amounts for series 2006A debt certificates and a series 2007A general obligation bonds. The new debt extension allows the city to pay back $3,315,000 and $2,880,000, respectively. Another $120,000 will be used to finance the underwriter and other issuance costs.
“We may or may not issue the maximum,” Fredrickson said, noting how the city approved the ordinance establishing the terms of the bond. “It sets a ceiling or a maximum, if you will.”
Fredrickson said the way in which debt service schedules compare from year to year is notable when taking interest into account.
“Interest rates fluctuate with the market,” he said, noting how the downturn of the economy played a part in the city accumulating more interest in the past. That’s no longer the case.
“Rates are considerably lower,” Fredrickson said.
Officials said the revenue bond is estimated to generate a savings of $460, 258.20, over the remaining life of the debt extension, set to run until 2022.
“We have a fairly strong bond rating,” Fredrickson said. “If we didn’t, we would’ve had to pay a higher bond rate.”
In 2015, Yorkville received AA- financial rating from Standard & Poors Rating Agency.
Fredrickson said the city’s history of paying back debt over the years should serve as a reassurance to residents. The interest will be lower, he added.
If residents should feel the council’s action should be countered, a backdoor referendum will be accepted through Aug. 2.
The Yorkville City Council is expected to consider bids from the bond sale at a meeting tentatively set for Oct. 25.