By Roger Bloom | NB Indy
The City Council on Tuesday moved to take advantage of expiring federal subsidies and a historically favorable market, approving a $128 million bond issue to pay for the Civic Center project and refinance a 1998 library bond issue.
The Council made the move even though some of the construction contracts for the Civic Center have yet to be let.
“Historically, bond rates have been this low or lower just 2 percent of the time,” said Mayor Keith Curry. “So if we wait until January, the odds are 89 to 2 we’ll be looking a less favorable numbers.”
The bonds to be issued will be taxable Build America Bonds, with the federal government paying 35 percent of the interest for the city. This will save the city more than $5 million over the life of the bonds.
But the Build America Bonds program will end Dec. 31, and legislation to extend it has not passed Congress.
“Delaying the financing any futhre could jeopardize the significant savings offered from the BAB program and expose the City to potential market risk versus the favorable financing rates available at this time,” wrote Administrative Service Director Tracy McCraner in the staff report.
Of the $128 million in the new issue, which the city staff said should be closed by the end of this month, $123 is earmarked for the Civic Center.
This is in line with most previous estimates, but city officials say if the rest of the construction contacts come in under estimates as the initial ones have, the cost will end up significantly lower. In that event, excess funds would be redirected to other projects in the city.
The $123 million will also be a ceiling. In the event the pending contracts start coming in over estimates, the project would be scaled back to keep the total cost under $123 million, officials said.
In addition to the favorable bond market and the BAB program, the city is benefitting from a down construction market that is driving down the bidding on contracts, and from its recently received AAA credit rating.
The credit rating allows the city to obtain a better interest rate, but it also means the city does not have to set aside a debt service reserve, further reducing the city’s costs by $845,000, McCraner wrote.
The Civic Center project includes a new City Hall, Council Chambers, community room, park with a dog park and restored wetlands, and parking structure, as well as an expansion of the existing Central Library.
Grading is under way, with construction of the parking structure set for the next phase.
