City agrees to debt measure, contract, kicking off new police facility construction

Posted 3/18/20

Tumbling interest rates in the wake of the spread of the novel coronavirus may prove a benefit to the City of Madisonville, which accepted a bid during a special meeting Monday night for $1.25 million in debt across 15 years with an interest rate of 1.28%.

This item is available in full to subscribers.

Please log in to continue

E-mail
Password
Log in

City agrees to debt measure, contract, kicking off new police facility construction

Posted

Tumbling interest rates in the wake of the spread of the novel coronavirus may prove a benefit to the City of Madisonville, which accepted a bid during a special meeting Monday night for $1.25 million in debt across 15 years with an interest rate of 1.28%.

The measure, tax and revenue certificates of obligation, will fund a new public safety facility for the Madisonville Police Department and renovations to City Hall.

Certificates of obligation are debt issuances allowed under state law without voter approval under strict conditions. They can only be used for construction, demolition or restoration of structures; purchase materials, supplies, equipment, machinery, buildings, land and rights of way; and pay for related professional services.

City financial and legal advisors reviewed four bids – from JP Morgan Chase, Regents Bank, Prosperity Bank and TIB Bank – that arrived Monday morning before advising members of the Madisonville City Council to approve a 15-year non-callable note from JP Morgan Chase. Muncipal debt often has a five-year callable option that allows a government to refinance a note if interest rates have fallen or the body is able to pay the remainder of the note early.

With interest rates so low, though, advisors told council members there was little need.

“This rate is so low, you probably wouldn’t be able to refinance after five years,” said Ben Rosenberg of U.S. Capital Advisors. “We just got really lucky with all that’s going on.”

The total interest cost on the note will be only $124,456, Rosenberg said.

The U.S. Federal Reserve Sunday cut its target interest rate to nearly zero in response to the COVID-19 pandemic, just weeks after another emergency half-percentage-point cut. The spread of COVID-19 has sent Dow Jones Industrial Average into a bear market for the first time in 11 years.

“(Four Bids) was a good showing, considering the anxieties in the marketplace,” Guy Goodson of the law firm Germer PLLC, also advising Councilmembers on the matter. “It’s a very competitive rate. It shows that they think a lot about (the city’s) credit rating.”

After accepting the bid from JP Morgan Chase, the council also awarded a construction contract for the new police building of up to $958,558 to Madisonville-based Texas Source Contracting.

With that award, Fred Patterson of Patterson Architects told Councilmembers that construction should be able to begin before May.

“This is something we’ve looked at for several years, but now it’s becoming a reality,” Madisonville Mayor Bill Parten said.

Comments