Tiffin reviews bond issues
TIFFIN— A proposal for bonding both parts of a two-phase Capital Improvement Plan through 2023 met with some resistance Wednesday, June 27, during a special meeting of the Tiffin City Council. Jeff Heil, Vice president of Public Finance for the Iowa office of Northland Securities, and associate Michael Hart presented a finance plan summary to the council prior to the councilors setting a date for a public hearing on financing phase one of the city’s Capital Improvement Plan.
“We’ve been talking about this for months,” Heil said. “Nothing has really changed.” Heil said they were present to see if the council was willing to set the process in-motion. He encouraged the council to set a public hearing for bonds for both phase one and phase two with a capped amount of dollars, and approving both phases at one time. Heil said doing so did not actually issue the bonds, but was more of a convenience factor.
“Do we want to get all of the hearings done at one time?” he asked. “(It) lets the public know what’s going on.”
The estimated cost for the two phases of the plan equal $12.7 million, with a debt service schedule extending to 2028. The city’s financing ability is just under $10 million, which will not allow for financing the entire amount at once. However, Heil said he was told to work out a solution that would not raise water rates or taxes, and draw upon Tax Increment Finance (TIF) money as much as possible. Around $4.8 million of General Obligation (GO) bonds would allow all of phase one to be accomplished, Heil told the council.
The estimated costs for projects in phase one include: Ireland Ave. extension ($3 million), the water tower project ($2,300,000), and extending water service to the industrial park ($750,000). The estimates have varied on these projects, and these are the amounts Northland Securities used for their proposal.
Heil said phase two projects would need to be funded through GO Annual Appropriation bonds. Phase two is a lengthy list of projects including providing access to the east soccer fields and west ball fields off of Jasper Avenue ($50,000 each), resurfacing Jasper Ave. from Hwy. 6 to the bridge ($80,000) and finishing the fields at the City Park (east and west of Jasper Ave., $120,000). A concession stand for the City Park ball fields ($80,000), remodeling the former Tiffin Locker into a city hall and expanding the parking lot ($200,000) and a sidewalk to the Hwy. 6 tunnel from Roberts Ferry Road along the north side of Hwy. 6 ($370,000) are also included.
Mayor Steve Berner told the council he had a no-obligation, no-cost bid of $320,000 to remodel the locker, and councilman Chris Ball asked for an estimate on building a brand new facility for cost comparison.
Also in phase two are rebuilding Roberts Ferry Road from Hwy. 6 north to Goldfinch ($2,500,000 before any grant funds), resurfacing Jasper Avenue from Hwy. 6 north to Forevergreen Road ($1,500,000), upgrading water mains in the original part of Tiffin (17 blocks @ 30,000 each for $510,000), installing Ultra-Violet (UV) protection at the sewer plant, when required by the state ($600,000) and putting up lights for four ball fields at the City Park ($590,000).
The current list totals $6,650,000.
Northland’s plan was structured to match the city’s expected TIF revenue (approximately $800,000 annually) with annual principal and interest costs of $780,000, reduced $450,000 by using TIF revenue in place of raising taxes. Heil said he hoped to be on-track for the council’s Aug. 8 meeting, when the public hearing would be held and interest rates locked in. Heil also recommended the city get a bond rating through a firm such as Standard & Poor or Moody’s. The cost to the city would be approximately $7,500 for either, but the city would be looking at a lower interest rate than without. Whatever the rating, it would be valid through the term of the financing. Future financing plans would require a revised rating.
“I think you’re going to get a pretty decent rating,” Heil said.
Councilman Travis Weipert asked what would happen if more is taken of the TIF funds, and Heil said it would require either cutting some phase two projects or extend the financing timeframe. “We want to be able to capitalize as much (TIF funds) as we can, staying at $800,000 or less means we can do both phases,” Heil explained.
“Twelve point seven million dollars. It’s a lot of money,” councilman Jim Bartles said. “You’re telling us we don’t have to raise the water rates or taxes?”
“Correct,” Heil answered.
Heil did suggest modifying the rates without actually raising them. Currently the city bills a monthly minimum of $18 for the first 2,000 gallons of water, and $5.50 per 1,000 gallons of water thereafter. Heil suggested changing the base volume from 2,000 gallons to 1,000, which he said increases the city’s intake.
According to Heil, annual appropriation bonds allow the city more flexibility in paying them back through TIF or other funds. “You can use any source of revenue to pay it,” Heil said. But using water improvement revenue bonds would force the city to increase the water rates. Annual appropriation bonds also do not hurt the city’s debt capacity, he noted.
Bonding for both phases together would use 79 percent of the city’s debt limit, but drop to 30 percent within seven years, based on Heil’s projections. “You’re in a wonderful position to do these projects,” Heil said. “Many towns are tying up their funds for 20 years.”
Councilman Mike Ryan took exception to the phase two list. As a self-described resident of “old Tiffin” Ryan described his part of town as neglected, and decried the fact most of the projects were for improvements in the newer parts of town.
“Everything in the last 15 years has been in developments. We cannot forget the original part of town. TIF has devolved us into two Tiffins,” Ryan said. “I absolutely won’t support anything until we have a plan for the old part of town.” Heil reminded Ryan that projects on the list could be shifted or changed while using the same bond dollars. “Many communities are tapped-out; you’re not. This plan today does not tap you out from another $2-3 million project,” Heil said.
City Administrator Michon Jackson suggested small, gradual increases in fees and/or taxes were a good thing for additional revenue for the city, in addition to the bonds.
“I just want a plan,” Ryan repeated, “for the old part of Tiffin, to bring the old part into the standard for every other part of Tiffin.” Ryan acknowledged his fellow council members could out-vote him, but said he would not support the proposal.
Mayor Berner said phase one needed to be addressed, as those projects are underway, and called for a public hearing for the phase one bonds and a possible re-financing of existing bonds. Interest rates are historically low, he said, and warned they could go up. Berner said he only saw time as an issue.
With no consensus for a public hearing to bond for both phases one and two, a motion was made for an Aug. 8 public hearing, during the regular city council meeting, for $4.8 million in bonds for phase one and to re-finance existing bonds. With all ayes, the motion carried. The council also voted to move forward with acquiring a bond rating through Standard & Poor’s.