Interest rates on bonds to finance Bettendorf's capital improvements come in higher than expected; post-election expectations cited as factor in hike

The election of Donald Trump may have many meanings around the country, but in Bettendorf one of the most immediate impacts will be higher interest rates on new city debt.

And, that translates into higher costs for the coming slate of capital improvements, ranging from a new $250,000 ice-skating rink to $1.4 million in downtown redevelopment to $700,000 for a Great Lawn in the new Forest Grove Park.

The higher interest rates also prompted the city to scrap a $28-million General Obligation (GO) bond refinancing plan, at least temporarily.

City officials had hoped the issuance of new bonds (to pay off older bonds with higher interest rates) would lower overall interest expenses by more than $2 million. The lower principal and interest payments would have provided additional breathing room in the city's debt levy, from which the city makes payments on its current $124-million debt.

"It appears that since the election, the bond market has moved and not in our favor" was how the city's bond consultant explained to aldermen last week (11/15) in recommending the refinancing be shelved. The Springsted Financial consultant speculated the bond market was anticipating greater spending for capital improvements under the new administration, which would mean greater competition and higher interest rates on bonds.

The higher Interest rates on the 13-year refunding bonds reduced the projected reduction in future interest expense from $2.3 million to only $855,000. The council decided to reject the bids for the refunding bonds, but may seek another round of bids at a later date if bond interest rates reverse course.

The same uneasiness in the bond market also pushed up the interest rate on an additional $12.455 million worth of general obligation bonds the city council approved for "various public improvements."

Those capital projects range from a "Great Lawn" at the new Forest Grove Park to new city garbage and recycling trucks to the financing of a new ice skating rink (being built at Middle Road and 23rd Street), a downtown fire station addition, fitness center upgrades and downtown property acquisition, demolition and streetscaping work.

The low bid from Baird was 3.14 percent interest on the $11.04 million tax-exempt general obligation bonds. Baird also was the successful bidder on the $1.4-million in taxable general obligation bonds with a 3.7 percent interest rate. Last year, interest rates on general obligation bonds issued by the city were under 3 percent.

The city's credit rating by Moody's remained at Aa2.

CLICK HERE for an overview of the city's debt service fund.

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