February 5, 2010

City borrows millions for less than 1 percent interest

To cover the tab for the $7.4 million the city has spent on the downtown mall site so far, the city this week sold taxable notes to investors willing to loan the money.
When officials did it last year for the first time, note buyers agreed to accept 2.33 percent annual interest in return for taking on the taxable notes.
This week, when the city sold another one-year note to cover the debt, taxpayers caught an even bigger break.
Investors proved willing to take just .85 percent to loan the city the money for another year.
“It’s an excellent deal for the city,” said Matt Spoerndle, the city’s financial advisor.
Spoerndle said the city, which had four bidders, snagged the best rate any Connecticut municipality has yet secured.
The city typically sells tax-exempt bonds because they are used to pay for civic improvements that fall within the norm of municipalities, such as schools, roads and parks.
But when the city bought the mall for $5.3 million in 2005, it leaped into a commercial enterprise that required different handling than the city’s other ventures. It has spent an additional $2.1 million since to demolish the mall and pay lawyers and other outside experts.
The city initially loaned itself the money for the mall purchase from its healthy rainy day fund, but last year recognized the need to borrow the money elsewhere.
City Comptroller Glenn Klocko said last year the city could just keep rolling over one-year taxable note until something is done with the 17-acre Depot Square sit on North Main Street.
The nonprofit Bristol Downtown Development Corp. is working out an agreement with the Long Island-based Renaissance Downtowns to work on a plan for the site’s revitalization.
Klocko said the cheap rates the city got are a matter of timing and a reflection of Bristol’s solid credit rating.
That four bidders were interested, said Spoerndle, also shows how well investors regard Bristol.
Copyright 2010. All rights reserved.
Contact Steve Collins at scollins@bristolpress.com


Anonymous said...

Glenn can be one big PIA, but when it comes to bonding, he's right on and knows when to exactly float the bond for the benefit the city. Good job, GK.

Anonymous said...

He is borrowing money to replace a squandered rainy day fund. The surplus funds are gone. That is like borrowing money to put into a savings account, then telling everyone how good you are at saving. Would you do that with your personal finances? This guy is bonkers.