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Buoyed by revenue from the recently imposed occupational tax, the City of La Grange is considering refinancing the bonds it holds as part of its agreement to develop Oldham Reserve.
At a special meeting on Monday, the city council heard from Dwight G. Salsbury of Ross, Sinclaire and Associates about a refinancing plan that could significantly lower debt payments, eliminate an $8 million lump sum payment and help the city end debt payments early.
The refinancing would take place under a special Kentucky League of Cities program that allows any KLC member to issue bonds through a pool that other KLC members also use. The interest rates on the bonds are tied to the amount of funds in the KLC pool, Salsbury said.
The KLC route is a better route, Salsbury said, because the city still holds a low credit rating from being downgraded last summer. Salsbury said he doubted rating agencies like Moody’s would bump the city’s rating back up after only two quarters of collecting the occupation tax.
“The downgrade has hurt (borrowing efforts),” Salsbury said. “We can’t go out with our current rating. So the best option is going to KLC and get a better rate. The markets could be a little skeptical if we go out on our own.”
Under the proposed refinancing plan, the new bonds issued would apply only to OLDA/Oldham Reserve payments, which are for the Oldham Reserve property, Mayor Bill Lammlein said.
Currently the city has received roughly $325,000 from the first quarter of collecting the occupational tax and is projecting to collect the same amount in the second quarter of collecting, Lammlein said. That projects to be roughly $1.3 million in revenue for the city in a given year, he said.
The new plan would set annual debt payments around $1.1 million a year. That would give the city extra money, even in a worse case scenario, to roll over to future years, Salsbury said.
“So if you wanted to, the city could exercise callback provisions to pay off the debt even earlier,” he said.
Under the current financing, the city won’t pay off its Oldham Reserve bonds until 2031. It will also be on the hook for a more than $8 million lump sum payment in 2015. If they refinance the bonds, Salsbury said, all bonds would be scheduled to be paid off in 2025, six years earlier, even if the city doesn’t use extra funds from rollovers to pay it off sooner.
“And keep in mind, what you’re looking at here is a worst case scenario (when it comes to revenue and Oldham Reserve),” Lammlein said.
With city council and mayoral elections this year, Lammlein asked what would happen if the occupational tax was repealed, as several candidates for city offices have campaigned on. Salsbury said it won’t make the new bonds default, but future city councils and mayors will be on the hook for a $1.1 million bond payment once the refinancing closes.
The first reading of a proposed ordinance will occur at the council’s May meeting, Lammlein said. A second reading is tentatively scheduled for the June meeting, he said.
The refinancing would then close in late June, Salsbury said.
Also at the special meeting, the council approved binding elements for a new grocery/convenience store at 617 West Jefferson Street.
The new store, to be called La Grange Food Mart, will be owned by Mo and Yudwinder Singh.
The council approved variances from current code for a higher fence, a midnight closing time and more lighting on the property.
Councilwoman Debbie Pollard said neighbors have no issues with the changes and that everyone in the resolution and binding elements was agreed upon by both the business owners and nearby residents.
Mo Singh said it would take about two to three months before the store will officially open.
“We think it’s great you want to do this,” Lammlein said. “We really need a grocery on that side of town.”
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