COOLIDGE — Council members were pleasantly surprised by a revised scenario presented on the sale of $5 million in general obligation bonds for construction of the new aquatic center Monday evening.
The revision was part of a resolution placed on the agenda, giving the city the option to either sell the bonds to individual investors or to directly place the bonds with a financial institution.
Placing the bonds with a bank would half the repayment term — dropping it from the initial 20-year repayment plan to 10 years.
The interest rate on the bond would also drop from 4.5% to 1.3%.
When the bond was proposed last year, a financial overview estimated that the city would pay $2.8 million in interest on the $5 million bond over the 20 years. Under the new terms, the city would only pay about $391,000 in interest.
“You’re looking at saving the voters about $2.4 million in interest from our original scenario,” Finance Director Gabe Garcia said, “and cutting the time (of the bond) in half.”
According to Garcia, the city is hoping to levy an average 50-cent secondary tax rate to pay back the bond. But he cautioned that the 50 cent rate may lead to a revenue shortfall.
Whether or not the shortfall would come to pass, Garcia said, would depend on city’s growth rate over the coming years.
“As we grow, that 50 cents brings in more money for each house that we have (in city limits),” he said. “We only levy what we need to be able to pay that payment. So in the 10 year scenario, the city would probably have to backfill, so the city would be taking on some of the debt with the voters.”
Garcia later confirmed to PinalCentral that if the city did not see the anticipated growth, the backfill would be derived from city revenue rather than an increase in the tax rate.
“If we’re cutting the term in half, and it’s going to cost a lot less money for our taxpayers, I think that’s a pretty good deal,” Mayor Jon Thompson said.
Garcia described the option as a “win” for the city, and said his department intended to lock in the lower interest as soon as possible.
The resolution passed in a 5-0 vote.