City bonds sell out first day
Interest rate 'exceptional'
BY BOB SMITH
CALIFORNIA CITY - A $2 million bond issue to pay for improvements to the city sewer system sold out the first day it hit the market, California City Finance Director Terry Hicks reported.
Not only was the sale very successful, but the interest rate that the city will have to pay, 6.01%, was exceptional. "We were very happy with this interest rate," Hicks explained. "It shows that we were more successful in marketing this than the last time we issued bonds."
The bonds were issued by the Sewer Fund to raise money to pay the General Fund back for advances made to construct the addition to the sewage treatment facility.. "We should net about $1.7 million after all the expenses of the sale are covered," Hicks said. "Considering some of the economic news the morning of the sale, we did very well in the market."
The good interest rate and quick sale reflects a vast improvement in the marketplace's evaluation of the fiscal health of the city. Prior bonds had to be sold at a premium due to what the market considered the city's "risky" financial status.
The tale could have been even better if the sewer fund could have shown better financial results the past couple of years. "There is something called 'debt service coverage'" Hicks explained, "that if we had raised sewer rates when we first started losing money could have resulted in $300,000 or so less interest paid over the life of these bonds."
"We're right on schedule with this sale," Hicks said, "the budget
already includes this so we are in good shape financially with respect
to this."
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