On a 4 to 3 split vote, the Brainerd City Council Monday rejected a decision it made two weeks ago for a $1.795 million bond sale to help pay for its various 2011 street projects.
Instead, the council voted Monday — with council president Mary Koep and council members Bob Olson, Kelly Bevans and Kevin Goedker in support — to reject the bond sale and go for bids on a $1 million bond two weeks from now. Council members Dale Parks, Lucy Nesheim and Bonnie Cumberland opposed the motion.
Olson and Koep voted in support of a similar motion two weeks ago, which failed to pass by a 2 to 4 vote. Goedker was absent at that meeting.
This means the city will use about $795,000 from the city’s construction funds for the projects and would reduce the overall tax levy on the bonds by about $922,000.
Olson made the motion to reject the bond sale and presented figures on the impact of a $1 million bond.
“Even if the interest rate is real good, I’m not going to support the amount of this bond because I don’t think the city needs to borrow this kind of money to pay for our city needs,” said Olson.
Paul Steinman, the city’s bond counsel, recommended resetting the bond sale date for two weeks from Monday, rather than reducing the bond amount. He told the council Monday that the city received a bid for a $1.755 million bond, a savings for the city over its original bond issue.
Steinman said the council will be taking the risk that interest rates would go up or down and there’s a risk that underwriters may not be willing to rebid on this bond sale.
Council member Bonnie Cumberland said she would hate the city to issue a bond now and have to return in the future to issue another bond with less favorable rates to pay for these city projects.
“I would rather take care of everything up front right now,” Cumberland explained. “I think it causes some (bond) purchasers to question our stability when we seem to change our minds on what it is we want to do.”
Bevans said if he had to chose between a $1.7 million and $1 million bond issue, he chooses $1 million.
“I’d rather reduce the levy now and it’s money in the bank for our taxpayers,” said Bevans.
“And to levy more than what we absolutely need, even if we could use it in the future, just doesn’t seem fair to the people who have to pay the bill.”
Council member Lucy Nesheim said she disputed Olson’s figures. She said she would rather compromise with a $1.4 million bond.
Council member Dale Parks said he felt $1 million in bonds was cutting the city too close.
“The assessments are something you’re counting on, you may or may not get that and may need another bond anyway,” said Parks. “If there’s an option for $1.4 million, I would also support that.”
The council also authorized the refinancing of its $2,090,000 improvement bond to take advantage of better interest rates, saving the city nearly $150,000.
JODIE TWEED may be reached at jodie.tweed @brainerddispatch.com or 855-5858.