Elgin gets a deal on $25 million bond sale
Elgin's largest bond sale in at least 15 years comes at a low interest rate thanks to the city's strong bond ratings, officials said.
The 2.4 percent interest rate for the 15-year, $25 million bonds came at the end of a "very popular" online auction Wednesday morning, said Raphaliata McKenzie, vice president of finance consultant Speer Financial Inc.
The money will fund road and utility improvements.
The winning bidder was Citigroup Global Markets Inc., which bid three times; another bidder did so five times, McKenzie told the city council Wednesday night. The multiple bids yielded $39,000 in savings for the city by the time the auction was over. "That's just to show how badly they wanted this issue," she said, adding, "Your name (Elgin's) is well-known."
Elgin earned a AAA rating, the top rating, from Fitch Ratings for the fifth consecutive year; its rating with Standard & Poor's is AA+, a notch below. The difference is due to the rating agencies' formulas for economic factors such as per capita income and more, McKenzie said.
On the other end of the spectrum is Chicago, whose borrowing interest rate last year was nearly 8 percent, Councilman Rich Dunne pointed out.
The bond sale amounted to $24,995,000, or $5,000 below the original $25 million figure approved by the city council, because that allowed the city to save $14,000 in fees required by the bond rating agencies, McKenzie said. Speer Financial's fee for the consulting process was about $38,000, she said.
Councilman John Prigge asked how much higher the interest rate would have been if Elgin's bond rating were AA+ for both Fitch and Standard & Poor's.
McKenzie estimated that AAA ratings with both agencies would have yielded an additional savings of about $80,000. She also said the state of Illinois' fiscal woes can lower the appetite for local municipalities' bond sales.
Elgin Chief Financial Officer Debra Nawrocki said bond principal and interest payments in 2016 will amount to $2.1 million; water and sewer fees will pay for the $10 million portion for utilities improvements, while property taxes will fund the $15 million in roadwork.