Vernon Hills' good bond rating helping fund police station
A top rating had investors earlier this week clamoring to buy bonds issued by the village of Vernon Hills, with the proceeds to be used to shave interest payments and fund a long planned building project.
"There were seven bidders and we received 50 bids," said Finance Director Larry Nakrin. "It's kind of an auction process. They had a little bit of a frenzy."
Piper Jaffray, an investment bank based in Minneapolis, was the winning bidder at an interest rate of 2.621 percent for the $5.71 million general obligation bond sale. Just over $2.1 million of the proceeds will refinance village bonds issued in 2007, saving the village $243,000 in interest payments, Nakrin said.
The remaining $3.6 million will be used to renovate the original police department headquarters at 754 Lakeview Parkway, which was built in 1992 and is considered outdated.
The bidding last Tuesday proved to be a badge of fiscal pride for village officials. Standard & Poor's assigned an AAA rating to Vernon Hills' bond sale, citing a strong local economy, an ample cash reserve, its management of liabilities and other factors for its outlook.
Vernon Hills also received an AAA bond rating in 2010 from Moody's Investors Service.
"You were very popular. They like you," Kevin McCanna, president of Speer Financial Inc., the village's financial adviser, told village trustees.
"He said it was very, very unusual to see this type of bidding," Nakrin added.
Standard & Poor's noted the village's budgetary flexibility with $23.4 million in available reserves. That amounts to 115 percent of the general fund budget, which covers day-to-day operations.
The company also cited a diverse tax base in which the 10 largest taxpayers account for only 9.7 percent of the village's more than $1 billion in assessed value. Another favorable factor was that about two-thirds of the village bond debt will be paid off in 10 years, according to Standard & Poor's.
The bonds that are being refinanced paid for the acquisition of a former insurance office building just south of the police facility that was converted into a fire and police dispatch center, among other uses. Patrol officers, investigators and administrators still occupy the original building.
Architectural drawings have been made and a construction management company hired. Bids for the work will go out to subcontractors in mid-January, said Building Commissioner Mike Atkinson. Construction is expected to begin in late February or early March.
"It's really to bring the space up to the operational needs of the police department today, which is different from 20-some years ago when they built the building," he said.
The wedge-shaped building includes a two-story lobby and courtyard in the middle of the buildings which are underutilized, for example, and there is inadequate locker room space, police officials have said.
Most of the interior of the building will be gutted and reconfigured and the roof and heating and cooling systems will be replaced.