City eyes timing on entry into bond market

Published 6:03 pm Tuesday, December 7, 2010

Though the Troy City Council gave the mayor authority to refinance utility and general obligation bonds in October, the timing hasn’t been quite right for Troy to enter the market.

“For three weeks municipal interest rates have been rising,” said Troy Mayor Jimmy Lunsford, explaining why the city hasn’t taken the final step just yet.

But, despite the increase in rates, the city will have to make a move to enter the market before the year’s end.

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“A series of market and external events have caused our rates to move up,” Lunsford said. “But we have to sell our general obligation issue before year end … looks like we’ll go into the market next week to sell by the end of the year.”

The general obligation bond will include $5 million in new revenue and will fund a $4 million library project, and a new Lillian D. Green Nutrition Center.

The utility bonds will provide funding for sewer and water projects and an electric substation, but Lunsford said this bond may have to wait until next year.

“These are future projects that are being designed and hopefully will be bid right away,” Lunford said.

Lunsford said he will continue to watch the bond market and if projections indicate the market rates will only increase, the utility bond may be sold right along with the general obligation bonds.

“I want to get a better feel about what’s going on, and if the trend will trend up, maybe go in for utilities,” Lunsford said.

The mayor said regardless of whether the utility bonds are sold now or later, the projects would not be impacted by timing.

Lunsford said even while rates are not as favorable as he would like, they aren’t too far off.

“We probably would have been under 4 percent two months ago, but we weren’t prepared two months ago to go in,” Lunsford said.

The average rate now is around 4 percent or a little higher, Lunsford said, making the rates still “very favorable.”

Once the city does make the move, City Clerk Alton Starling said local businesses can invest in city bonds.

“When we go through the bond market, there will be opportunities for local investors to invest through local companies like Troy Bank & Trust, Regions and Wells Fargo,” Starling said. “They can purchase those bonds through those investors.”

Starling said not only is this an opportunity for business owners to take ownership in their city, its also a way to save on interest rates and taxes through their investment.

“Right now, if you take $5,000 and invest in a CD in a bank, you are getting less than 1 percent of your money, and the federal government taxes on top of that,” Starling said. “In municipal rates, you are getting 4 percent, and it’s not taxable.”