To help cover the cost of the Stearns Avenue and Highway 23 project, the city took out a $1.2 million FmHA general obligation water and sewer bond at 5.125 percent interest in 1994. That bond is due in 2024.
Eastvold explained to the council that if they continued at their present course they will be paying $1,033,764 in interest over the life of the bond. If they cash in a portion of the short-term investments the city has made, the city could prepay $680,000 and could save about $783,815 in interest.
If the payment schedule on the 1994 bond issue were allowed to run its course until 2024, the city would collect $1,943,700 through water and sewer rates. By prepaying $680,000, the amount of sewer and water user fees required to meet payments would drop from $51,000 to $30,000 per year.
“This would be a big savings for residents on their water rates,” Eastvold told the council.
Dennis Wilde, city administrator, said, “Homeowners would probably not see a rate reduction as a result of the prepayment. The $21,000 balance would be placed in a reserve fund to help cover the costs of future projects.”
Eastvold recommended the city pay down the bonded debt early as it could cut back their debt payment schedule by 11 years on this 1994 bond issue.
The council will decide on this issue at their next regular meeting on March 25 at 6 p.m.
Eastvold also explained the bonding for the 1998 street project. The council set April 8 as the bond sale date for general obligation bond of $860,000 to cover the expenses of the 1998 project.
In other business:
• The council was informed the Releaf Grant was turned down for funding. Ron Mergen, public works director, said the city has money to help cover the cost of tree replacement following the 1998 construction project.
The council approved the tree committee soliciting bids up to $6,500 for trees for the 1998 street project.
• The council appointed Jeff Thompson to represent the city on the fire contract negotiating committee. At a recent fire contract meeting with the townships, it was decided to form a negotiating committee to begin work on the fire contracts which expire on Jan. 1, 2000. The committee will be made up of the fire chief, city administrator and a representative from each of the participating cities and townships.