Assessment Interest Rates and Deferrals
At our July 13 meeting, the city council voted 4-1 to move forward with the Holloway/Stanich Highlands project. This is a project that we are accelerating -- the economic downturn has meant low prices on construction work, as many contractors are desperate for work and their bids show it. Federal monetary policy and record-low interest rates have also meant amazingly low interest rates this year for a highly rated government borrower like Maplewood, even while many private sector borrowers continue to face difficulty borrowing money from skittish banks and lenders.
The same economic conditions that make borrowing and building attractive for the city right now are making more residents than usual anxious about assessments. The city staff and council have taken a couple of steps to alleviate these concerns.
The first has been that on two accelerated projects we are deferring assessments for all residents for two years, interest free. With the low interest rates and low construction bids, we'll be saving more than enough to carry the interest on the assessments. The result will be that the streets are done a little sooner than originally planned, homeowners won't be paying assessments any sooner than they would have on the original CIP schedule (unless they choose to) and will actually pay this year's assessment rate rather than higher future assessment rates, and the savings mean that the ultimate long-term debt of the city will be lower than projected.
The second step we took was to adjust the interest rate charged on assessments this year. In the recent past it was 6%, but given the lower interest rates from our bond sale earlier this year, we unanimously approved a resolution at our May 28 meeting to reduce the assessment interest rate on 2009 projects to 5.4%. The same resolution sets a policy going forward of tying assessment rates to the city's actual borrowing costs plus 2% for administrative expenses.
The same economic conditions that make borrowing and building attractive for the city right now are making more residents than usual anxious about assessments. The city staff and council have taken a couple of steps to alleviate these concerns.
The first has been that on two accelerated projects we are deferring assessments for all residents for two years, interest free. With the low interest rates and low construction bids, we'll be saving more than enough to carry the interest on the assessments. The result will be that the streets are done a little sooner than originally planned, homeowners won't be paying assessments any sooner than they would have on the original CIP schedule (unless they choose to) and will actually pay this year's assessment rate rather than higher future assessment rates, and the savings mean that the ultimate long-term debt of the city will be lower than projected.
The second step we took was to adjust the interest rate charged on assessments this year. In the recent past it was 6%, but given the lower interest rates from our bond sale earlier this year, we unanimously approved a resolution at our May 28 meeting to reduce the assessment interest rate on 2009 projects to 5.4%. The same resolution sets a policy going forward of tying assessment rates to the city's actual borrowing costs plus 2% for administrative expenses.
Labels: finance, public works
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