Hays raises $6.48 million to pay on Vine St. rebuild
Hays on Thursday raised $6.48 million in the bond market for its big Vine Street corridor reconstruction project, while at the same time snagging a low interest rate.
The successful buyer of the 12 general obligation bonds was Milwaukee-based multinational investment bank Robert W. Baird & Co. Inc. Baird beat out three other bidders.
Hays will pay back the debt over 25 years at a true interest rate of 1.79%, according to David Arteberry, the city’s bond advisor with Stifel, Nicolaus & Co. of Wichita.
The money will come from proceeds of a 2% bed tax on travelers staying at the city’s hotels and motels.
“The results went really well,” said Arteberry of the sale done through an online portal.
The interest rate was just a hair higher than the 1.77% rate estimated in January, but lower than February when rates went up, Arteberry told the Hays City Commission at its regular meeting Thursday evening in City Hall, 1507 Main.
The sale took place by ZOOM earlier in the day Thursday.
As part of the deal with Robert W. Baird, the company agreed to pay the city a $300,000 premium, reducing the size of the original $6.795 bond issue, he said.
“The city will still get all of the funds it needs to reimburse itself for the project,” Arteberry said.
Before the sale, the city’s credit worthiness was confirmed with a AA rating from S&P Global.
“That is an excellent rating,” said Arteberry, who joined the commission meeting by phone. “We went back and we looked at the rating of a lot of other communities in Kansas, and considering the size of your community, a double A rating is about as high, if not the highest, rating amongst all your peers.”
The general obligation bonds go toward paying off the $13.2 million reconstruction of north Vine Street now underway around the Interstate 70 overpass and U.S. Highway 183.
Principal and interest combined on the debt total $8.48 million, according to Kim Rupp, city finance director.
The average debt payment annually will be about $338,553 annually, Rupp said. Payments start in 2022, with the city planning to pay off some of the 12 notes early within 10 years, he said, to save on interest costs.
The bond issue goes through legal proceedings for state approval, with the money delivered to the city on April 15, Arteberry has said.
By structuring the offering as a 25-year bond, it lowers the annual payment, but also leaves room for the city to pay the notes off faster with surplus money from guest tax proceeds.
The offering was widely advertised through the Bloomberg financial news wire and the bond industry’s trade newspaper, The Bond Buyer.
The city went to market at a time when interest rates are at all-time lows due to a lack of supply in the bond market, Arteberry previously told the commission.
Ellis County in August 2020 in robust bidding from 14 bidders raised $5.4 million selling 10-year bonds to fund road and bridge work. The county got interest rates effectively below 1% on 10 maturities.
The Vine Street reconstruction calls for four roundabouts to replace stoplights at intersections where side streets enter the busy north Vine commercial corridor. With one roundabout already completed, the project includes rerouting some streets, and a roundabout where off and on ramps enter U.S. Highway 183 from Interstate 70.