O’Fallon Finance Committee hears report on savings resulting from refunded bonds

By Martha Stoffel

O’FALLON – The Finance and Administration Committee received a presentation from Robert Vail, Director of Public Finance for Bernardi Securities, on the final savings the city will see from the refunding bonds. 

The city council approved in August the ordinance to refund the 2009 and 2009A bonds issues that were callable in January 2019. The bonds were issued in three series starting in September and ending mid-October. 

Bernardi Securities, with guidance from city staff, refunded the longer duration bonds first to minimize the negative effects of rising interest rates. Doing so allowed the city to recognize additional interest savings of $166,047. 

Prior to the refunding, the net interest for the bonds was 5.43 percent. The true interest after refunding ended up being 3.51 percent, for a savings of $3,098,297 for the city. Projections from Bernardi Securities in July anticipated savings of $2.3 million. Director of Finance Sandy Evans was able to negotiate lower underwriting costs with Bernardi as well. 

Vail also took time to highlight the city’s continued AA+ bond rating. He indicated that O’Fallon is the only city south of Peoria to have AA+ or higher bond rating, with only 22.36 percent of S&P-rated municipalities in Illinois falling in that category. The bond rating directly impacts the interest rates the city is able to receive, and the AA+ rating allowed the city to get more favorable rates for additional savings. 

The committee also approved to send to council the 2018 tax levy and the 2020-2024 Capital Improvements Plan. The proposed tax levy request is $6,688,900, a 0.86 percent increase from 2017. A tax levy request is based on a dollar amount, not a rate, so the city tax rate will be determined upon final calculation by the county of the City’s total EAV from property assessments. The levy will be voted on by council in November and submitted to the County in December, but the tax rate will not be set by the county until April 2019. 

Council received a presentation at the October 29th Committee of the Whole of the 5-year Capital Improvements Plan (CIP). The presented CIP is for the period of May 1, 2019 through April 30, 2024, fiscal years 2020 – 2024. Each city department included projects and funding sources. Implementation of projects are based on available revenue when the budget is put in place each year and approved by council, so listed projects may or may not occur in the fiscal year presented.

The 2020-2024 Capital Improvements Plan totals $66,721,423 worth of projects, with $25,732,823 for FY2020. Almost eighty-eight percent of the CIP projects are for public infrastructure, with vehicles (6.6 percent) and equipment (5.7 percent) representing the next two largest project categories. The CIP will be a helpful tool when staff sets the upcoming budget.