Interest expenses the city of Le Mars pays on borrowed money will be reduced with a type of debt refinancing.
The Le Mars City Council Tuesday approved the process of refunding for several city bond issues and financing for current water system improvements.
Refunding is when a city sells new bonds to pay off similar existing bonds for the benefit of a lower interest rate.
The total savings will be $1,114,000, according to Chip Schultz, Ruan Securities, of Des Moines.
Ruan staff worked with city staff and the city council's finance committees to arrange the new financing for three projects.
The financing involves water, wastewater and general obligation debt.
* The savings will be $218,118 from refunding the 2007 General Obligation State Revolving Fund debt for the Environmental Protection Agency's Coal Gasification Site project.
The interest rate on the General Obligation refinancing averages 1.03 percent compared to the 3 percent rate on the existing General Obligation debt, Schultz told the city council.
* An interest savings of $339,679 will result from refunding 2003 water revenue State Revolving Fund debt and water improvements financing.
* The third savings of $556,281 involves the wastewater debt from 2004 sewer revenue State Revolving Fund debt.
All three financings were given an A+ bond rating by Standard and Poors, a bond rating company, Schultz said.
This was the first bond rating for the city of Le Mars water and sewer revenue debt, he added.
"The city staff did a fantastic job in the marathon hour and a half rating (phone) call that we had with Standard and Poors," Schultz said.
Hurricane Sandy, which struck the Mid-Atlantic and the Northeastern U.S. in late October, was felt a little in Le Mars, he said.
"The ratings reports were delayed because Standard and Poors had infrastructure problems in their New York Office," Schultz said.
The changes in borrowed money for city projects continued the city's practice of paying off debt early, he said.
"The final maturity dates were reduced between two and seven years," Schultz said.
The city will work with Ruan Securities to finance an upcoming city project, according to Bill Cole, assistant city administrator.
The city had considered the State Revolving Fund to finance the $16-$20 million dollar wastewater treatment facility project located 2 miles west of Le Mars.
Equipment, a lagoon and buildings to treat some wastewater from Dean Foods and Wells Enterprises will be constructed on 120 acres of land owned by the city.
The project is expected to get underway early next year.
Conventional financing of taxable revenue bonds instead of the State Revolving Fund is being recommended for the project, Cole told the council.
"The State Revolving Fund brings with it group of requirements and time constraints," he said.
Mayor Dick Kirchoff asked if that meant the financing would be more economical.
Cole said by the time the city added the additional costs of the State Revolving Loan program, the conventional financing would cost less.
The interest rate on the wastewater project financing is projected at 2.45 percent, Cole said.
Tuesday the council set Dec. 13 as the date for bids on the wastewater treatment project.
Construction is slated to begin in January of next year and end in December of 2013.