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IDAHO FALLS – The City of Idaho Falls’ sale of Certificates of Participation to fund the Idaho Falls' first police station met with an enthusiastic reception in the market, resulting in an interest rate for the city much lower than the conservative 3.25 percent expected.
The city originally anticipated the total project interest of approximately $12.4 million dollars over the course of a proposed 22-year repayment schedule. By taking advantage of favorable market conditions and high investor interest, the sale of the certificates yielded a much lower overall interest rate of under two percent, translating into millions of dollars of savings for the city.
“This 1.89 percent rate represents incredible savings for the taxpayers of Idaho Falls! Being able to move promptly and to strategically schedule the sale of the certificates to coincide with the most favorable Bond Market conditions really paid off,” said Idaho Falls Mayor Rebecca Casper. “This is tax money that the citizens of Idaho Falls can know will be spent on other community priorities and not on financing. That feels so good!”
The Idaho Falls City Council approved the sale of COP’s to finance the new police facility at the City Council meeting on November 24. The approval followed news that the City had been awarded an Aa2 issuer rating from Moody’s Investor Services with high marks for a “strong financial profile that is expected to strengthen in the near-term with healthy reserves and positive operations.” The City received an Aa3 rating for the city’s COP’s.
The City received the favorable ratings in part due to the fact that it has already identified and included up to $2 million dollars in funding in the annual budget to make the base payments on the certificates. Moody’s also added that the City’s “governance [was] a key driver of the initial rating incorporating management's focus on building reserves and implementing budget management and capital replacement policies.”
Certificates of Participation, or COP’s, are tax-exempt bonds issued by governmental entities that allow them to secure financing for capital projects without incurring long term debt. The financing comes in the form investor purchased certificates, which are then repaid over time in the form of lease revenues, as opposed to bond interest.
“The City Finance Team along with our financial consultants were able to execute an aggressive approach to structuring a funding package and leverage the most favorable market conditions,” said Pam Alexander, City of Idaho Falls Municipal Services Director. “And while we were keeping our eyes on the market daily, our team’s ability to act in accordance within City Council approval and cut the expected interest rate by nearly half.”
“I am very pleased with the work of the city’s finance team,” said Mayor Casper. “Director Alexander assembled a very capable and professional team to help deliver this incredible result.”
An agreement for professional services was approved by the City Council on Thursday, December 10 to begin the phase II design and construction of the facility.