Bonds for 911 center come with 3-percent interest
Flathead County will pay a 3.03 percent true interest rate for the next 17 years as it pays off an $800,000 bond sale approved by commissioners on Tuesday.
Only one bid — by D.A. Davidson — was submitted to sell the bonds on the county’s behalf.
That interest rate is less than the 3.7 percent the county is paying on the original $6.1 million in bonds that were sold in early 2009 to pay for construction of the 911 center.
“These are very effective borrowing costs,” Aaron Rudio of D.A. Davidson’s corporate office in Great Falls, said. “Any one of us would take that rate.”
Flathead County received such a favorable interest rate, he said, because the county has a AA bond rating, the second-highest rate anyone can obtain.
D.A. Davidson also offered to pay the county a $13,440 premium on the sale, Carlson said. The county has incurred $30,000 in costs to pay the bond attorney, financial consultant, printing fees and underwriting costs, which were to be subtracted from the $800,000 total. With the premium, the county’s costs for the bond sale, excluding interest, now drop to $16,560.
County Finance Director Sandy Carlson said she was surprised that multiple bids weren’t submitted, based on the number of calls she received in the last couple of months about the sale. She speculated the debt ceiling issue facing Congress may have affected the county’s sale. And she said many bond buyers want shorter issues than 17 years.
The $800,000 bond sale is somewhat of an “awkward size,” Rudio said, which may account for the lack of bidders. It’s difficult for firms to break up small bond amounts into packages attractive to investors, he said.
On the other end of the spectrum, the $800,000 amount was higher than most individuals choose to bid on, Carlson said.
Carlson said the interest rates offered by D.A. Davidson “were reasonable and expected.”
Each year the county will pay a different interest rate, but the rate doesn’t increase above 1 percent until 2016.
The county will make two bond payments a year, on Jan. 1 and July 1, for 17 years. Principal and interest are due in the January payment and the July payment is an interest-only payment, Carlson said.
Those due dates match up with the original bond payments for the center.
Property tax bills issued this fall will have another line item added to collect the additional money to pay off the bond issue, Carlson said. Tax bills already include amounts to recapture the $6.1 million sale.
The county agreed to sell the bonds to help fund the 911 center. That center, which opened in June 2010, hasn’t been able to build up a cash reserve or set money aside to pay for new equipment. The county has shuffled $1.2 million from the capital expense and cash reserve funds for the center to buy new needed equipment. Selling the bonds allows some of that money to be repaid.
In November 2008, voters in Flathead County approved a $6.9 million bond issue to pay for the 911 center, a consolidated emergency dispatch center housing operations previously handled in the county Sheriff’s Office and police departments in Kalispell, Columbia Falls and Whitefish.
Because construction bids came in lower than expected, the former 911 director recommended the county sell only $6.1 million of bonds and save the taxpayers the additional money.
But as the project progressed, equipment ended up costing more than had been expected and it’s costing more than had been expected to buy and maintain communication towers and digital radio equipment, county officials have said.
Reporter Shelley Ridenour may be reached at 758-4439 or sridenour@dailyinterlake.com.