Originally published in the 9/29/17 print edition of Yellowstone County News.
BILLINGS — Good news for county taxpayers!
The bond sale to finance the addition to the Yellowstone County Detention Facility (YCDF) was much better for county taxpayers than even best expectations.
On Tuesday, County Commissioners approved a $9.7 million general obligation bond sale at 2.24 percent interest over 20 years to Robert W. Baird & Co., Milwaukee, Wisconsin. Their bid was one of nine — far more bids than expected — and the rate of interest offered by Baird was considerably lower than the conservative 3.75 percent originally estimated by County Director of Finance Kevan Bryan, in preparing the bond proposal for consideration by voters.
But, even more, the rate was also lower than the most likely 2.75 percent rate that the county’s advisors, Springstead, said they should expect. Springstead, a public sector financial consulting firm, also said that the county should expect only four to six bidders. The stiff competition of nine bidders generated the lower interest rate.
“It was a surprise,” said Bryan, “They paid a premium to get this bond.”
The interest of so many firms wanting to get the loan results from the fact that Yellowstone County is such a good credit risk. Standard & Poor recently gave the county a AA+ rating, the highest possible and the highest of any government entity in the state, said Bryan.
Credit for that goes to present and past boards of county commissioners, who have managed the county’s finances in a fiscally prudent way, said Bryan. Because of their fiscal restraint over the years, the lower interest rate will save county taxpayers about $100,000 a year, which will amount to about $1.78 million over the life of the loan.
It’s a rare piece of business for financial institutions.
“There is not a lot of bonding being done with a rating like that and at that amount,” said Bryan.
Payment on the bonds will be about $600,000 annually, although there are options to pay it off earlier if the county chooses – probably not a good option given the low rate of interest, commented Bryan. If interest rates go up, the county could make more money by investing any reserves, he explained, but that’s a decision to be made in the future.
The bond sale will close on Oct. 24.
The $9.7 million bond helps fund the $18.8 million jail expansion. Voters approved the county borrowing the money in an election in June 2016. The balance of the cost was drawn from county reserves and capital improvement funds.
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