Advisers provide basic timeline for funding Grandview Heights municipal complex project
The time might be right for the city of Grandview Heights to pursue the financing for building a new municipal building complex.
The city's credit rating "is very strong, and interest rates are currently at an all-time low," said Brian Cooper, director with Baker Tilly Municipal Advisors.
Cooper and Tom Ricchiuto, a manager with Baker Tilly, provided an overview of the current market conditions Jan. 19 to City Council. The consultants also outlined a basic timeline for how the city could proceed with selling bonds to help pay for the municipal building project.
The Spaces and Places community plan adopted two years ago identified as a priority the construction of a municipal complex, including administrative offices, the police department and a new fire station. at the southeast corner of Grandview Avenue and Goodale Boulevard.
The new facility would replace the municipal building and fire station located at 1016 Grandview Ave.
The city likely would finance the project by a combination of issuing bonds and using some cash at hand, Cooper said.
Using available cash would help reduce the size of the debt that would result from the bond issuance, he said.
The last time the city issued bonds was in late 2018 for the construction of a new service-department complex.
At that time, the 10-year tax-exempt interest rate was about 2.7%, "which was pretty low," Ricchiuto said.
A spike occurred last year due to the COVID-19 pandemic, but the market has normalized a bit since then and the interest rate is about 0.7%, he said.
Right now, Grandview has five outstanding bonds with a total remaining debt of about $18.9 million, Ricchiuto said.
Ricchiuto provided estimates for the annual payments that might result if the city issues bonds in amounts ranging from $8 million to $17 million.
The actual total likely would fall somewhere in the middle, he said.
If the city were to borrow $12 million for the project, the annual principal and interest would cost an estimated $789,766 over 20 years, Ricchiuto said. The annual payment would total about $659,000 if spread out over 28 years.
A 1% increase in the interest rate would increase the annual payment by about $81,000 for a 28-year period, he said.
City Council would need to approve a bond ordinance authorizing a specified project that would not exceed a specific bond amount, Cooper said.
The bond amount would include "some wiggle room in case the interest rate changes or there is an unanticipated change in the project cost," he said.
The plan for the project would need to be finalized before the bond ordinance could be adopted, Cooper said, so there would be a general sense for how much the project would cost.
The city would be "very strategic about that," said Bob Dvoraczky, director of operations and chief of staff.
"We have to make sure we have the fiscal wherewithal to support this," he said.
If the building cost were more than the stated debt service, the city would have to be able and willing to use available cash, Dvoraczky said.
"Just because you can borrow (a certain amount) doesn't necessarily mean you should," he said.
By the time the process gets to the point of issuing bonds, "we will have thoughtfully thought out how far we can go and how far the team is comfortable going," Dvoraczky said.
"It's not just what the data says" on the borrowing estimate sheet the financial advisers have prepared, he said.
The Standard & Poor's credit rating service evaluates and provides the city's credit rating, Ricchiuto said.
The agency has given Grandview its highest possible rating of AAA, he said.
Borrowing additional money for the municipal building project would not risk lowering the credit rating, Cooper said.
The timeline for completing the process of issuing the bonds, including council's approval of an ordinance authorizing the bond issuance, a credit rating review by S&P and the sale and closing of the bonds, would be about 60 to 90 days, he said.
Ahead of that, the city would have to determine the planning details for the project, including the size and scope of the complex that would be built, Cooper said.
CTL Engineering has completed site evaluation work for the property at Goodale and Grandview, with its report expected by the end of January, said P'Elizabeth Koelker, the new director of planning and community development.
Koelker said she plans to present to council more details in February about what the timeline for planning the project might be, including who would be involved in the process.