By LeAnn R. Ralph
COLFAX — The Colfax Village Board is considering refinancing $1.3 million in revenue bonds and adding $360,000 to the amount for financing sewer and water for the Park Drive extension and for painting and repairing the water tower.
Brian Reilly of Ehlers and Associates spoke to the village board about the revenue bonds at the board’s April 22 meeting.
In December, the Colfax Village Board approved issuing $1.3 million in general obligation bonds to refinance old debt and for new money for part of the Park Drive project and for the village’s share of the fire station.
The 2004 revenue bonds carry interest rates of between 4.4 percent and 5.5 percent, which are considered to be high interest rates now, Reilly said.
The revenue bonds in 2004 were issued with 110 percent coverage requirement (110 percent of the original amount issued) and no debt service reserve, he said.
Typically the coverage requirement is 125 percent of the original amount and the debt service reserve is 10 percent of the original amount, Reilly said.
This time around, the village will likely get better interest rates, although the coverage requirement might be for 125 percent, and the village may have to keep a debt service reserve of 10 percent, Reilly said.
State statutes do not set any limit on the amount that can be borrowed through revenue bonds, although the amount is limited by the amount of revenue that could support borrowing the money, he explained.
In this case, the village’s sewer utility and water utility will be supplying the revenue for the bonds.
State statutes allow municipalities to borrow up to 5 percent of the total property value for general obligation bonds, Reilly noted.
Colfax currently has about $900,000 remaining in borrowing capacity, he said.
Issuing revenue bonds for Park Drive and the water tower will leave remaining general obligation borrowing capacity if the village needs the money for another project, Reilly said.
Reilly recommended starting with Bremer Bank to see if Bremer were interested in the village’s revenue bonds.
If Bremer is not interested, the bonds can be taken to the open market, he said.
The Colfax Village Board has substantially raised sewer and water rates over the last few years.
The sewer and water rates were both raised by 3.8 percent in 2009.
In 2011, the village board approved raising the water rate by another 53 percent and the sewer rate by another 24 percent.
The Public Service Commission of Wisconsin requires a return of between six and eight percent annually on sewer and water utilities, and the rate increases of 53 percent and 24 percent put the utilities into the required range for returns of between six and eight percent.
Prior to the rate increases, the Colfax sewer and water utilities were operating at a deficit and losing money every year.
Before the initial increase in the sewer and water rates, a rate increase had not been implemented in more than ten years.
If the village board had not raised the sewer and water rates, the village would not be in a position now to issue revenue bonds for Park Drive and for the water tower, Reilly said.
Reilly plans to attend the village board meeting in May.
If the village board approves selling the revenue bonds, the board can expect to approve a resolution in June to award the sale of the bonds and can expect to have the money in hand by July, Reilly said.
In other business, the Colfax Village Board:
• Approved a bartender operator’s license for Gary Stene, effective until June 30, 2013.
• Approved a contract in the amount of $6,500 with Don’s Sweeper Service for 2013 to sweep the streets in late April or early May, during the summer (July) and in the fall (late October or early November). If the village board agrees that more sweeping is needed, the additional service will cost $104 per hour. Additional sweeping may help for phosphorus discharge into the Red Cedar River, noted Beverly Schauer, village trustee.
• Approved an authorization to change the signers on village accounts, removing Gary Stene and Kathy Morse and adding Scott Gunnufson. Schauer also was retained as a third authorized signer.
• Approved hiring Larry Paul to repair the northwest corner of the municipal building in amount of $350. The mortar disintegrated and the blocks fell out of that area of the building, reported Rand Bates, director of public works. Paul indicated he would do the repair as soon as possible, he said.
• Learned from Lisa Fleming, project manager with Ayres Associates, that work may start again on Park Drive as early as May 6 if the weather cooperates.
• Learned from Fleming that the painting of the bridges over the Red Cedar River may start on June 20 if the weather cooperates.