City considers new debt
Published 11:55 pm Saturday, August 22, 2009
Suffolk is contemplating issuing new debt to keep the utility fund afloat, Finance Director Dale Walker said last week.
“If we don’t do this, we’ll probably run out of money sometime in February,” Walker said in a phone interview Friday.
David Rose, who represents the city’s financial advisor Davenport & Co., told City Council on Wednesday night that Suffolk could take advantage of bond options offered through the American Reinvestment and Recovery Act of 2009. The city’s goal is to keep the utility fund completely self-supporting, independent of the general fund.
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By January 2010, Rose said, the city will have roughly $17 million available in capital funds. Rose recommended the city not go below $13 million of available capital funds in 2010 before borrowing for additional capital needs. Rose added the city expects to spend about $2.5 million per month on average in the first six months of 2010.
The Davenport advisors recommended the city issue “double-barreled” bonds that offer competitive interest rates, do not count against the city’s debt capacity and can be covered by the city’s utility fund revenues. Rose recommended borrowing by February 2010.
In addition, Suffolk city will continue talks with the credit rating agencies to maintain a favorable position, Rose and Walker said.
“We’re going to put in writing our financial plan and our policies so that we’re transparent not only to the rating agencies, but to everybody in the local business world,” Walker said. “The idea is that if you can put those in writing, the rating agencies will look a little more favorably at you, which drives the amount of your interest down.”
Walker added the amount of debt issued likely would be about $25 million. A public hearing on the debt will be held in the coming months.