County delays borrowing amid turmoil in bond market
Recent turmoil in the municipal bond market prompted Douglas County commissioners to delay, at least for a day or so, borrowing money to finance new radio equipment and a new public works building.
Instead, commissioners voted 3-0 this afternoon to authorize the sale of up to $15.2 million in bonds, provided the county can get an interest rate of 4.5 percent or less.
"Our plan was to have the bonds sold and bring the final interest rates to you for consideration this (Wednesday) afternoon," said Craig Vahrenberg from the investment banking firm Piper Jaffray, which advises the county on bond issues. "But the bond market has gone through a significant amount of volatility and an increase in interest rates since last Wednesday (June 19)."
As recently as June 12, Vahrenberg said, he was anticipating that Douglas County would be able to sell its bonds at 3.64 percent. But by early this week, he said, the estimated rate was over 4.5 percent, and it still was not clear whether rates would continue to go higher.
By the close of business today, Vahrenberg said, the bond market appeared to have settled down, but he advised commissioners to take a look-and-see attitude before jumping into the bond market immediately.
As a result, commissioners passed a resolution authorizing the chairman, Mike Gaughan, to sign documents issuing the bonds in the future, provided they can be sold at a "true interest cost" not to exceed 4.5 percent.
That's still significantly lower than the average rate on 20-year bonds through most of the 1990s, when rates fluctuated between 5.5 and 7 percent, according to information from Piper Jaffray.
In other business, the commission:
• Approved a road project and an application for federal funding to resurface County Road 458 south and east of Clinton Lake, from Banning's Corner to U.S. Highway 59. The project includes adding 6.5-foot paved shoulders and accommodations for bicycle traffic. The total project cost is estimated at $2 million, but the county will seek as much as $500,000 from the state's share of a federal transportation program that helps fund road projects that improve access to federal lands.