LAWTON – The first tranche of general-obligation bonds authorized in an election last year for additional street improvements was authorized by the City Council, and attracted an interest rate well below the Federal Reserve’s benchmark.
Local voters last year narrowly approved an 11-year extension of the 2017 ad valorem tax street improvement program that is projected to produce an estimated $60 million for streets and bridges. In an election held Sept. 12, 2023, the proposition passed by 41 votes out of 2,391 ballots cast: 1,216 yes versus 1,175 no.
The council on June 25 authorized the sale of an initial $6.3 million in GO bonds, backed by ad valorem taxes, to be used for constructing, rebuilding, improving or repairing streets and roadways and bridges throughout Lawton.
Bids on the tax-exempt bonds were opened May 14, said Chris Gander, managing director of Oklahoma Public Finance, Bank of Oklahoma.
Four bids were received, he said. The lowest bidder was PNC Capital Markets of Philadelphia, Pennsylvania, which bid an interest rate of 3.410951%. The Federal Reserve, America’s central bank, has kept its benchmark interest rate between 5.25% and 5.5% since last July, to tamp down inflation.
“In this instance we are able to borrow money for construction at an interest rate much below the inflation rate, making borrowing a wise decision,” Mayor Stan Booker
told Southwest Ledger.
The net interest cost over the life of the $6.3 million GO bonds will be $1,399,022, a spreadsheet provided by Gander showed. Thus, the total cost to retire the bonds will be $7,699,022.
The bonds will be paid off over a nine-year period at $700,000 plus interest annually, from Dec. 1, 2026, through Dec. 1, 2034, city r ecords indicate.
Lawton’s Series 2024 GO bonds received a “AA-” rating from Standard & Poor’s, one of the le ading rating agencies in the world.
The 2017 ad valorem levy was expected to produce $55.3 million from property taxes. “Expenses have just gone crazy, and in the construction industry prices have almost doubled on everything,” City Engineer Joe Painter said at the time . “So, now it’s apparent we will spend the $55.3 million and not get that initial list of projects completed.”