Sugar Grove waits for a better rate on bonds

The village of Sugar Grove has delayed the sale of $2.7 million in general obligation bonds and $600,000 in motor fuel tax bonds to get a more favorable interest rate in repaying them.

The bonds will be issued through a competitive sale involving multiple companies rather than a negotiated sale with one company. The sale is expected to take place in about two weeks.

The decision was discussed at a village board meeting earlier this week. During the meeting, board members learned Standard and Poor's, a financial rating company, had upgraded Sugar Grove's municipal rating from A to A plus.

"The upgrade was based on good managerial practices and strong reserves," Kevin McCanna told the board. McCanna is financial consultant to the village and president of Speer Financial Inc. of Chicago.

The board approved the issuance of the bonds at its May 6 meeting to pay for the improvement of the village's waterworks and sewage system with the construction of new water mains and water treatment and storage facilities.

According to village treasurer and financial director Justin VanVooren, the village is also selling general obligation refunding bonds, which were issued originally in 2001.

"You can think of it as similar to refinancing a mortgage," VanVooren said. "The bonds were issued in 2001 at a rate of about 4.5 percent. Now we can probably get a rate lower than that. The economy has done crazy things with interest rates, and the municipal bond market has been up and down."

Selling the bonds at a lower interest rate will save the village when it repays the bonds.

A municipal bond is issued by a state, city, school district or other local government. Bonds may be general obligation or tied to a specific revenue.

The issuer of the bond receives a cash payment in exchange for a promise to repay the investors over time.