The sale of $820,000 in bonds to help finance the reconstruction of Cherry Avenue and related improvements, along with news of an upgraded bond rating, occupied the Annandale City Council on Monday, May 4.
Council members received a positive report from financial advisor David Drown, who explained that over the past month his firm purchased an updated bond rating from Standard and Poor’s before seeking bids to purchase the bonds.
"The reason to do that is a good rating lowers your interest rate and saves you more than it costs to get the rating," Drown explained.
As it turned out, that action included a two-fold benefit, as Standard and Poor’s upgraded Annandale’s rating from A-plus to AA-minus.
"S&P pretty much liked what they saw," said Drown. "It’s not going make a world of difference, but it’s certainly heading in the right direction. Generally speaking they said good things. They worry a little bit – you have quite a bit of debt but you’re managing it well and paying it off, and for a community your size a AA-minus rating is good, so well done on that."
The city received four bids to purchase its bonds, which included interest rates ranging from 2.92 percent to 3.27 percent.
The bid with the lowest interest rate came from Country Club Bank out of Missouri, which was joined by a more familiar name.
"Country Club Bank is a name we don’t normally see bidding bonds in Minnesota too often, but they’re there in concert with your local Annandale State Bank working as a team to submit a bid for the purchase of your bond," said Drown.
That 2.92 percent rate was almost exactly what Drown’s firm had advised council members to expect.
"That low bid was right on," he said. "It means all of the numbers (a previous representative from the firm) talked to you about in terms of how to budget for payments and that kind of stuff is just spot on and accurate."
In the end, Drown said all four bids were well grouped and reflective of the market, and council members agreed to proceed with the sale to the team of Country Club Bank and Annandale State Bank. The sale is expected to close within a couple of weeks.