ITHACA — Ithaca has sold the $4 million bond that pays for its Union Street project. Six firms bid on Sept. 30, and Robert W. Baird & Co. of Milwaukee offered the lowest true interest cost, 4.706114 percent. City Manager Jamey Conn signed the order awarding the sale the same day, according to the city’s Oct. 6 council packet. S&P Global Ratings rated the bonds “A” with a stable outlook. The bonds are to be repaid by April 1, 2041.
The record at a glance
- The vote: the council adopted Resolution 2026-17, authorizing the bonds, 6–0 at an 8 a.m. special meeting on Sept. 18. Councilperson Brooke Vernon was absent.
- The sale: six bids were opened Sept. 30. The lowest true interest cost was 4.706114 percent; the highest was 5.144330 percent.
- The winning bid: Baird offered to pay $4,021,153 for the $4 million in bonds, a premium of $21,153.
- The rating: “A,” stable outlook, from S&P Global Ratings, dated Sept. 18.
How the bond was approved
In September we reported that the city planned one $4 million capital improvement bond for Union Street and had scheduled a special meeting to consider it, and we said we would not report the authorization as final until adopted minutes or a signed resolution were posted. Both are now in the city’s packets.
The minutes of the Sept. 18 special meeting (PDF p. 5) record that Councilperson James Andrew moved to adopt Resolution 2026-17, “Authorizing Capital Improvement Bonds,” and Councilperson Clark Hubbard seconded. The roll call was Kristyn Roethlisberger, Andrew, Rob Endter, Brandon Ester, Hubbard and Mayor Brett Baublitz, all yes, with Vernon absent. No one spoke during public comment. The minutes say the meeting was called to order at 8 a.m. and adjourned at 8:04 a.m. The council’s draft minutes of Oct. 6, in the Oct. 20 packet, record that the council approved the Sept. 18 minutes that night.
The signed Order Awarding Sale (PDF p. 14) says the resolution adopted Sept. 18 authorized “not to exceed Four Million Dollars ($4,000,000)” in limited tax general obligation bonds, that a notice of sale was published in The Bond Buyer on Sept. 21 and that bids were opened at 11 a.m. Sept. 30. The resolution let the mayor, city manager, treasurer or clerk award the sale to the bid with the lowest true interest cost. The order is signed by Conn and dated Sept. 30.
The six bids
The packet’s Exhibit A (PDF p. 16–21) reproduces each bid. Ranked by true interest cost, the measure the sale was decided on:
- Robert W. Baird & Co., Milwaukee: 4.706114%
- Stifel, Nicolaus & Co., Birmingham, Ala.: 4.848351%
- BOK Financial Securities, Dallas: 4.865144%
- StoneX Financial, Winter Park, Fla.: 4.942613%
- Bernardi Securities, Northfield, Ill.: 4.957119%
- Huntington Securities, Chicago: 5.144330%
On the schedule in its bid, Baird listed a total interest cost of $1,572,636.81 and, after the premium, a net interest cost of $1,551,483.81. The next-lowest bid, Stifel’s, listed a net interest cost of $1,596,177.11, or $44,693.30 more. Huntington’s, the highest, listed $1,682,365.64, or $130,881.83 more than Baird’s.
Conn’s Oct. 6 report to the council (PDF p. 6) says six bids was more than the city’s adviser is seeing, and that the adviser “reported the average is between two and three, with some only receiving one.”
What the city will repay
Exhibit B (PDF p. 22) sets the final yearly principal payments, due each April 1. They start at $150,000 in 2027 and rise each year to $365,000 in 2041, adding up to $4 million. The interest rate is 5 percent on bonds due 2027 through 2036, 4.5 percent in 2037, 4.625 percent in 2038 through 2040 and 4.75 percent in 2041. Those rates match Baird’s bid, but the yearly principal amounts differ slightly from the schedule in the bid (Baird bid on $155,000 for 2027, for example). The interest totals above were calculated on the bid schedule, and the packet does not state a total for the final one.
S&P’s rationale (PDF p. 27) says the bonds are secured by the city’s “full-faith-and-credit limited-tax GO pledge” and are “payable from ad valorem taxes levied on all taxable property, subject to statutory limitations.”
What S&P said about the city
S&P’s rationale, dated Sept. 18 (PDF p. 27–28), says the “A” rating reflects Ithaca’s “stable albeit limited tax base and economic profile” and “very strong fund balances, although nominally lower than those of peers.” It says the city plans to contribute about $450,000 of its available fund balance to the road project funded by the bonds, and that reserves would remain about $1.7 million after that. It also says the city’s net direct debt is “nearly doubling with these bond issuances.” S&P says it could lower the rating if the city posts consecutive years of budget imbalance or its fund balances fall materially.
The letter is copied to the city’s municipal adviser, whose firm it names as Bendzinski & Co. The city manager’s written reports, and our September report, spell it Bedzinski.
What we do not know yet
- The total interest the city will pay on the final maturity schedule, and the date the bonds were delivered.
- What the city paid in adviser, legal and rating fees. Our September report cited Conn’s figure of $30,850 for the adviser on one issue.
- Whether the council has approved the fund-balance contribution S&P describes.
Corrections and responses are welcome.