$13.9 million in Mitchell city bonds soldInterest rate is 2.9 percent; payback over life of debt will be $17.695 million.
By: Tom Lawrence, The Daily Republic
Mitchell’s bonds to raise $13.9 million for four large city projects went on sale Tuesday and were popular with buyers.
The sale was completed Wednesday, according to Tom Grimmond, a senior vice president for Dougherty & Company. The bonds will have a 2.9 percent interest rate. They have a 20-year life.
Mitchell City Finance Officer Marilyn Wilson said the city will pay back $17.695 million in principal and interest over the 20-year life of the bonds, although that total could be reduced by a “call feature” in the bonds that would allow the city to pay them off sooner. The city is also charged issuance fees of $131,414.
Mayor Ken Tracy said the city did well, with interest rates low. This was a good time to move ahead on these major projects, Tracy said.
“We got about as favorable an interest rate as one could hope for,” he said. “We’re good to go now.”
The bonds will come in two series, one that will be wrapped up Dec. 19, when the city will receive the first $10 million, and the second on Jan. 10, when the city will get the final $3.9 million.
The city can only issue $10 million annually in bank-qualified bonds, which means the bond holders will be able to write off federal taxes on the bonds, which makes them more attractive, Grimmond said.
Wilson said the money will be deposited into the city’s checking account at Wells Fargo. The money will draw less than 1 percent interest.
This is not the biggest bond issuance in Mitchell history, Wilson said. She said the Bon Homme Yankton water bonds involved more money. Those bonds paid for a connection to a Missouri River water pipeline.
While most people will purchase a bond as an investment, Grimmond said some people also might want to buy one to say they own a Corn Palace bond.
The minimum purchase is $5,000.
“Usually they’re larger blocks than that,” Grimmond said.
He said sales are often $15,000 to $20,000 for individuals, and $600,000 and $800,000 for banks, municipal bond funds, and property and casualty funds.
If someone would buy $20,000 in bonds, they would receive $290 every six months, and would receive their investment back after 20 years.
The bonds will pay for $6.5 million in improvements and renovations to the Corn Palace, $2.6 million for a new city hall, $2.5 million for a second ice rink at the Mitchell Activities Center and $2.3 million for upgrades to the Mitchell Public Library.
While the bond money isn’t in the city’s hands, the city is already spending $265,000 for land for a new downtown city hall and nearby parking. That money is in addition to the $13.9 million from the bonds, Wilson said.
“We’re already dispensing funds for the purchase of property,” she said.