Council talks of Newton’s debt capacity
Newton City Council met for a bonding study session Monday afternoon.
Newton has several upcoming obligations that will require bonding, including the city’s role in securing Trinity Structural Towers and grant money offered to the Prairie Inn and Suites hotel being constructed south of Interstate 80 exit 168.
The city has already agreed to contribute to those projects, but will need to bond to meet their financial obligations.
The city will need roughly $1.23 million combined for a storage yard grant, rail spur grant and to pay its portion of the East Eighth Street North relocation project near Trinity Structural Towers. Trinity is the company that occupies a portion of the former Maytag Plant 2 and manufactures wind energy towers. The company has agreed to employ at least 140 workers and accept a minimum valuation of $8.5 million for the properties through 2021 in exchange for the city’s contributions.
Newton has also agreed to provide a development grant for Prairie Inn and Suites for a total of $250,000 in exchange for a minimum assessed value of $1.5 million through 2020.
In both cases, the bonds will be supported through tax increment financing, a mechanism the city employs that uses taxes on increased property values in the TIF distract to pay off the bonds over time.
Accounting for all projected debt, including existing bonds and the Trinity and Prairie Inn bonds, the city will carry roughly $23.75 million in debt in fiscal 2009-2010. That figures is nearly 66 percent of the city’s legal debt limit of around $36 million. Bonding advisers have recommended that the city not exceed 80 percent of the legal limit.
Community Development Director Bryan Friedman noted that the limit could come into play if and when the city encounters another major development, like Iowa Speedway or TPI Composites. However, in the case of a significant project, he noted that Jasper County could partner with the city, like when TPI built its wind energy blade factory in north east Newton.
By consensus, the council agreed to have the city pursue refinancing old debt with lower interest rates. Such a move could save the city an estimated $109,000 over the life of the bonds.