County to bond for courthouse project through HRA
Stevens County will finance the majority of its courthouse building and renovation project through the Stevens County Housing and Redevelopment Authority.
Following groundbreaking on the project Tuesday, the county's Board of Commissioners voted 3-2 to bond for the project through the HRA.
The county had other options, including Capital Improvement Plan bonds. County-issued CIP bonds could be less expensive to finance but the process of approving a county bond issue takes longer.
Board members Don Munsterman, Larry Sayre and Paul Watzke voted for the HRA bonding. Commissioners Herb Kloos and Ron Staples voted against it.
The county is expected to finance the estimated $11.5 million project by using cash reserves up to $4 million and bonding for the remaining $7.5 million.
There are indications that the project's cost won't be that high. Accepted bids for the first phase of the project, expected to be about $2.2 million, came in about $300,000 under the estimate. Larry Filippi said it's likely second-phase bidding will be just as competitive and that he wouldn't be surprised if those bids also came in 15 percent under estimates.
If the county issued CIP bonds, the estimated principal and interest costs over 20 years would be $11.07 million. If the HRA issued the bonds, the 20-year cost would be $12.07 million. However, the county would recoup about $297,000 from a Debt Service Reserve Fund and another $391,000 in interest earnings on the fund. In total, the HRA bonding would cost about $313,000 more than county-issued bonding.
But arranging the county bond issue would be more time-consuming and might mean the county would miss out on bond interest rates that are at their lowest point since 1967.
Bonding for $7.5 million through CIP bonds, the county is required to develop a five-year capital improvement plan, hold a hearing on the plan, then wait 30 days to allow for a possible petition opposing the plan signed by 5 percent of county voters from the last general election, according to Carolyn Drude, the county's financial consultant from Ehler's and Associates.
Through HRA bonding, the HRA issues the CIP bonds after approval from the HRA board the the City of Morris. The HRA technically owns the building and the county makes payments to the HRA totalling the principal and interest. Once the payments are completed, the HRA turns over ownership to the county, Drude said.
The simplicity of financing through an HRA makes it an attractive local government finance tool in Minnesota, Drude said.
For more on this story and other county business, see the Sun Tribune print edition and this Web site on Saturday, Oct. 10.