The city of Ketchum last week took a major step toward funding a set of large-scale improvements to its wastewater treatment plant.
In a special meeting Thursday, Dec. 16, Ketchum City Council members unanimously approved the sale of $1,990,000 worth of general-obligation revenue bonds to investors across the nation.
The vote in essence approved the terms of a bond sale that commenced on Tuesday, Dec. 14.
Eric Heringer, vice president of Seattle-Northwest Securities Corp., the firm that managed the bond sale, said the timing of the sale allowed the city to lock in interest rates at a figure lower than it once anticipated.
The average interest rate of the bonds—called the "true interest cost"—is 3.98 percent, about one-half point lower than what the city expected to pay before it asked citizens to approve the bond sale last February. Ketchum voters overwhelmingly approved the bond issue, with 95 percent casting favorable votes.
Heringer said his office received numerous calls last week from Ketchum-area investors interested in buying the city's bonds. However, many shied away from making a purchase because the interest rates were too low.
"When we actually informed them what the rates would be, they were a lot lower than they thought they would get," he said. "I think they were looking for higher-yielding investments."
Nonetheless, Heringer said, approximately 80 percent of the bonds sold in the first day. Helping the sale of the bonds, he noted, was an "A3" bond rating assigned by Moody's Investor Services, a New York City-based firm that provides independent credit ratings and financial information. The city previously held a markedly lower "BBB" rating.
Moody's indicated that the city deserved an "A3" rating because it has maintained substantial cash reserves and has a reliable source of revenues—from city wastewater accounts—to guarantee payments on the bonds over time.
Bonds were sold for terms lasting from one year to 20 years.
Heringer said the bonds would ultimately accrue approximately $880,000 in total interest costs. The city, however, does have an option after 10 years to pay off all of its remaining long-term bonds and reduce its overall interest costs.
On Feb. 3, Ketchum and Sun Valley voters approved plans for their cities to proceed with a $7.4 million upgrade of their jointly owned wastewater treatment plant, located south of Ketchum.
Engineers had determined that the plant has almost reached capacity, is too old to buy spare parts for and by 2006 would no longer meet state and federal water quality standards. Violations of those standards could result in fines of up to $10,000 per day, they said.
Ketchum will pay for its half of the total upgrade cost with revenues from the bonds and a low-interest loan from the state Department of Environmental Quality.
