By Chris Edwards
IVANHOE – Ivanhoe City Council voted to begin moving forward with its bond preparation toward street repairs. The city won a $2 million bond election last November to address this citywide need.
The decision was made at last Thursday’s council meeting. Mayor Cathy Bennett and councilmember David Herrington shared information they learned at a training workshop the night prior to the meeting.
“If we’re going to fund roads and we’re going to have funding for roads, we need to figure out how to get those funds positioned,” Herrington said.
Herrington outlined the options for obtaining the funding and the process that awaits the city for seeing to the road repairs.
He said the city’s financial advisers are going out for a competitive bid package for selling the bonds. The bonds are rated based on stability, economy and general business structure of the city.
“Until we can levy the debt service component of the tax rate, we can’t afford to pay for the bonds,” he said. The sale of the bonds and setting of the tax rates must happen closely in sequence. Herrington explained that when the budget is adopted for the coming fiscal year and tax rates are set, the bond sale calls can occur.
In addition to the bonds, the city is also awaiting results of a grant application for FEMA funds. The city applied for $6 million. If any of these funds are granted, Herrington said they will be put toward engineering work on the roads project, which must be paid up front. The engineering phase is one phase of the project, he explained. The next will be a cost benefit analysis, which could cost up to 3% of the overall project. Another phase of the project is an environmental assessment, which can take up to a year.
Herrington said the city had hoped to have a response from the grant application before moving forward with the bond sale, but after consulting with legal and financial advisers, the city will have to move on getting funds in place for the project. “If the answer is no, we really need to be able to have funds available so we can start construction this next season,” he said. “If the answer is yes on the bonds, we really need funds available so that we can begin the engineering work to actually utilize the grant funds…if the answer is yes.”
If the grant funds aren’t given, Herrington said the construction process will actually begin sooner, and estimated April 2020 as a starting point. If the grant funds are awarded, he said the engineering phase would likely last until September 2020 with the construction phase beginning in April 2021. “If we’re going to be able to get anything done, the money’s going to have to be there up front, unless we want to delay this a year at a time,” Herrington said.
Bennett added that if the grant money is awarded, the city will have to start moving right away, as lack of progress would tell the GLO the project “isn’t that much of an emergency for us.”
“We have to move forward with issuing the bonds this season,” she said.
Herrington said that Bennett has been in constant contact with the office Rep. Brian Babin (R-Woodville). Babin has written a “really strong supporting letter” to the General Land Office in favor of Ivanhoe receiving the grant money.
In order for the city to satisfy its obligation to make the interest and principal payments to sell the bonds, it must be able to levy the debt service tax component, Herrington said. That will be due in September, along with adopting the budget and tax rate.
Herrington said it is an aggressive sellers’ market and a healthy time to engage. Councilmember Rowland Priddy said the low interest rates make it an ideal time to move forward with the bonds.
Herrington noted with the current state of the market, investors are paying a premium, and the city could wind up with a full $2 million, instead of having commissions and fees taken out.