City’s bonds sell on 1st day
Published 1:20 am Wednesday, September 2, 2009
The city of Andalusia’s bond issue sold out Tuesday, the first day it was offered.
Mayor Earl Johnson said it was amazing how the $6.25 million deal came together. The bond issue will fund several projects, including renovations at Church Street School, utilities upgrades and road work on River Falls Street, and improved athletic facilities at Johnson Park.
“You will recall that Merchant Capital advised us to go to New York and meet with Standard and Poor’s,” he told city council members. “We wanted to get our bonds rated because that made them easier to sell.”
Johnson said there was a good chance the bonds would have been rated “triple B” if the city hadn’t made a personal appearance with Standard and Poor’s.
“That’s not anything to be ashamed of,” he said. “But we thought we could get them rated A-minus or A-minus-minus.”
Johnson, city clerk John Thompson and Ken Funderburk of Merchant Capital met with S&P in New York the last week of July.
“Two weeks later, we received an ‘A’ rating,” he said, adding that it is an excellent rating for a city of Andalusia’s size.
While in New York, the Andalusia team also met with an insurance company. Once the bond was rated, the insurance company agreed to insure the bonds at three-quarters of a percent, or approximately $90,000 over the life of the bond.
Tuesday morning, Merchant Capital called city hall for the final OK. By the time the council met at 5 p.m., the bonds were sold.
“Fortunately for us, the Dow went down Monday, and people were putting money into the bond market today,” Johnson said. “It worked out well for us.”
Johnson said that in the meeting with Standard and Poor’s, the two main questions were about the city’s reserve fund, which was depleted last year, and about the stability of Shaw, the city’s largest employer.
In its published rating, S&P stated, “We consider Andalusia’s financial position good, evidenced by its strong reserves and historically sustainable sales tax revenue stream.”
The bonds and proceeds will be finalized in the next two or three weeks, Johnson said.
In reviewing the city’s financial statement for the month ending July 31, the 10th month of the current fiscal year, Thompson said that revenues are $338,000 higher than budgeted, while expenses are $152,000 over budget. Footnotes to the financial statement show that most of the additional expenses could be attributed to street lights and special projects.
In other business, the council:
Awarded the low bid for construction of its access road into the industrial park to Grady Rawls and Son, Inc. The company’s bid was $1.28 million, a figure that was $140,000 below the original estimated cost of construction.
Agreed to move its first regularly scheduled meeting in October to Mon., Oct. 5.
“I hope y’all will consider doing this,” Johnson said. “I’ll tell you the truth. Troy plays UAB that night at 6 p.m. and I plan on being there.”