Cost of Monmouth police bond swells

MONMOUTH -- The new Monmouth Police Department facility will cost taxpayers a little more than originally expected when the city's bond sale closes Thursday.The city tried to keep a conservative estimate on the final rate, originally figured at 45 cents per $1,000 of assessed value. But what happened in the weeks leading up to the bond going to market was largely unprecedented.The historically low interest rates of 2.3 percent at the time of the election shot up to roughly 4.5 percent when the bond went to market two weeks ago.With the economy creeping back to prerecession levels, the Federal Reserve announced this summer its plans to taper the quantitative easing program -- purchasing bonds to stimulate the economy -- sometime this fall."What's tough with all this is that this (4.5 percent) is a really good interest rate," Monmouth City Manager Scott McClure said. "Unfortunately, it was awesomely good six months ago and probably will never happen again."Instead of the estimated 45 cents per $1,000, taxpayers will now see 51 cents per $1,000 to their property taxes -- nearly a $42 annual net increase from the expiring city library bond on a $180,000 home.When the city was putting the language together for the bond measure, it took a conservative approach to the going interest rates, adding an extra 1 percent to account for fluctuations.Even the best planning on the city's part couldn't account for interest rates doubling.The resulting 13.3 percent rate increase -- 45 cents to 51 cents -- is relatively low, considering how dramatic the increase in the bond market was, McClure said."We had some preliminary reports telling us we wouldn't hit 45 cents. We felt really bad," McClure said. "It isn't like we doubled or tripled the rate. It happens, just not exactly like we had hoped."Even with the increased interest rates the city managed to issue the bond for less than the $4 million cap -- $3.93 million.The city should have cash in hand sometime this week, thus beginning the next phase of the project.The design firm, contractors and construction company should be in place by the middle of October.Plans are to have a final renovation design in place by December, with groundbreaking by March.While the recent hiccup with interest rates and news of Detroit filing for bankruptcy have brought concerns on municipal investment to the forefront, municipal bonds are still some of the safest forms of investment out there, McClure said."Used to be, municipal governments were seen as essentially bullet proof as far as investments go," he said. "There's been six local governments defaulting on loans recently, compared to the tens of thousands of governments in the country. We're still a pretty good bet."


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