GARNER — At the Oct. 29 work session, town council members agreed to approve an increased initial bond issuance to take advantage of low interest rates. Council will formally allow staff to submit $9.285 million as the figure to borrow to the Local Government Commission for a deal expected to close on Dec. 19.
Council members had asked Davenport & Company to run figures for the increased borrowing – bringing the year’s total to $10 million – in order to take advantage of current interest rates a shade above 3 percent.
Davenport, the company advising the town on the bond issuance, said the town could borrow now and still limit the tax increase to pay bond debt to the promised 2.75 percent. Other key financial ratios also remain comfortably in line with town debt policy, according to projections. Debt service-to-town expenditures will briefly peak at 12.6 percent (policy sets a maximum of 15 percent) while debt-to-assessed value peaks at 1.28 percent. Town policy allows up to 2 percent.
“This shows that whichever option you choose, maximum borrowing works,” said Davenport vice president Mitch Brigulio.
The financial company said it designed those projections conservatively. It plugged in a 4 percent interest rate – considerably higher than current rates – for the first round of borrowing and 4.5 percent for later rounds of borrowing in fiscal years 2016, 2017 and 2019. Figures also assume 2.5 percent town revenue growth.
Interest rates will be priced and locked in Dec. 10. They depend on the bond market’s supply and demand, which could be affected by forces such as the stock market, concerns over Europe or instability in Washington.
“Right now, you’re looking in the low threes. As we talked about last time, there’s been a lot of volatility,” Brigulio said.
The town does not have to use the entire $35.7 million in bonds which voters approved in March. With low rates and higher growth – both of which the town consider real possibilities – the additional budget reserves could allow the town to borrow less or mitigate tax increases.
The town plans to raise property taxes 2.75 cents per $100 in valuation in 2015 or 2016. That will mean an extra $45 per year in taxes for the median home in Garner, which is valued at $163,400.
Police station design
Concerns over overages in the estimates on the new police station are being addressed, town manager Hardin Watkins said at the work session.
Town council has expressed concern about hundreds of thousands of dollars by which the initial projection presented by ADW Architects exceeded the $4.5 million budget.
“All the news coming from (the designers) is good news,” Watkins said.
Enclosed bump-out space in the back of the former office building at 912 Seventh Ave. as well as an $80,000 duct bank from building to building have been deemed unnecessary and cut since council requested the designers to get the project to budget.
Rec center design
Design firm Clark Nexsen presented its proposed contract to design the bond-funded, 33,600-square-foot recreation center to be built at the corner of Montague and Main streets.
The company (formerly Pearce, Brinkley, Cease & Lee before a merger) will charge a fee of $63,500 plus expenses to design the $7.8 million, three-gym facility. That work will include cost projections, site plans, environmental review and conceptual floor plans. One additional expense will be an additional $19,000 to Kimley-Horn & Associates, which will contract elements of site planning, traffic and parking projections and surveying.
The contract must still be approved by town council.
Jahner: 919-829-4822; Twitter: @garnercleveland