Sandpoint council approved water bond refinancing

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SANDPOINT — The city will be refinancing its existing USDA loan for water treatment and purse bond refinancing on the bond market.

With the refinancing of the water bond, City Administrator Jennifer Stapleton told Sandpoint City Council members at Wednesday's meeting that the savings for water rate payers is between a million dollars, but may be closer to $1.5 million. She wanted to clarify that this is a refinancing of existing debt as opposed to taking on new debt.

“That makes a difference,” said Stapleton, “especially when [the city] is doing a rate study.”

Councilwoman Deb Ruehle asked if there was a greater risk in going into the public market for the refinancing rather than staying with existing financing.

Stapleton replied that when the city goes to the Idaho Bond Bank it is typically because there is enough risk associated with the city of not getting a good bond financing and so they join with other cities in order to be able to have the best financial position in order to give you a strong bond rating.

Staff has been advised that the city would get better financing on the open municipal bond market as opposed to going to the bond bank at this point in time, she added.

Stapleton said that Sandpoint is like other municipalities up and down the state. If the city went through the bond bank, smaller municipalities that aren’t able to get a bond rating on their own would be able to take advantage of Sandpoint’s bond rating as opposed to the city taking advantage of another city's bond rating or entering a collective pool like Sandpoint has in the past, she said.

“There isn't an increased risk of going to the open market relative to our financial position responsibility for the bonds,” said Stapleton. “We believe that would save our rate payers dollars going to the open market.”

Currently the city has four USDA loans issued in 1997 (91-02 and 91-03), 2012 and 2013 for water system improvements. The original loan amounts were $19,388,000 and the outstanding principal as of Oct. 7, 2021, is $13,959,997.

The city will pay off the 1997 loan early in December 2021 and will go to the open bond market in the first quarter of 2022 in order to refinance the 2012 and 2013 loans.

City staff estimates the savings will well exceed $1 million and are projected closer to $1.6 million, said Stapleton.

At the Nov. 17 meeting council approved the engagement of Laura McAloon of McAloon Law to serve as bond counsel. The Securities and Exchange Commission requires that the city enage separate disclosure counsel. McAloon recommended Danielle Quade with Hawley Troxell serve as disclosure counsel and staff concerned with the recommendation.

This will be the first time that Sandpoint has gone to the open bond market instead of using USDA loans or the Idaho Bond Bank for refinancing. City staff said that the size and financial position of the city as well as the competitive interest rates in the open bond market justify this approach.