The Cambridge City Council and staff did a “happy dance” during the May 4 council meeting to celebrate the 1.58% interest rate the city received during its latest bond sale.
Nick Anhut, with Ehlers, explained the city received six bids for the sale of general obligation bonds to support a portion of the 2020 street improvement project and the final portion of the Cambridge Public Library project.
The winning bid for the sale of the $5,475,000 general obligation bonds was from Piper Sandler & Co. out of Minneapolis with a true interest rate of 1.58%.
Following discussion, the council approved a motion to approve the resolution for the sale of bonds to fund a portion of the 2020 street improvement project and the final portion of the Cambridge Public Library project.
“We are pleased with the sale results that occurred at about 10 o’clock this morning,” Finance Director Caroline Moe said.
Anhut said the city should be thrilled with the results of the bond sale.
“It’s a phenomenal rate, very good results, and as all of you can imagine, we’re probably in a period of low interest rates for the near term, but it’s good to see that come to fruition and be a benefit to the city as far as its projects,” Anhut said. “So first and foremost, I do want to offer some congratulations, not just on the rate, but Caroline (Moe) knows this, and did quite a magnificent job on the rating call with Standard and Poor’s. S&P, who evaluates Cambridge’s credit, affirmed the city’s very strong AA rating, which is why we were able to obtain these lower rates in the first place.
“All the rating agencies are definitely aware of the global pandemic, the impact that it’s having on communities not just across the country, but the world. They actually have an official position of a negative outlook. They believe that the recessionary pressure will have a negative impact on finances. Despite all that, the city’s very strong reserve levels, your strong financial policies, carried forward quite strongly with them and they saw absolutely no need to change the rating of the city and kept you in that top edge of the tier. So kudos to you all for having those policies and practices in place, as well as the management of the city. It certainly carried forward and it was instrumental in bringing these low rates to the city today. So my congratulations on that aspect,” Anhut added.
Other bidders included FHN Financial Capital Markets out of New York City; BAIRD out of Milwaukee; Northland Securities out of Minneapolis; Stifel, Nicolaus out of Birmingham, Alabama; and BNY Mellon Capital Management out of Pittsburgh.
Anhut explained with the lowest interest rate of 1.58% and the highest interest rate of 1.98%, the savings in interest costs is $131,658. He said these are 20-year bonds, with the majority being paid in 10 years for the street improvement project, and the library portion being paid back over a 20-year period from a city sales tax.
Anhut mentioned that about a month ago, Ehlers was estimating the city to receive around a 2.17% interest rate.
“With all the interest payments together, we come out at a 1.58% rate over the entirety of the 20-year term,” Anhut said. “This is about $300,000 less than our projections from just a month ago and certainly it’s a volatile market as well, so we’re very happy and pleased with the results and happy to bring them forward to you.”
Anhut said he was cautiously optimistic about the city’s bond sale.
“We saw some positive activity the last two weeks in particular and happy to see it come through for the city here,” Anhut said.
Mayor Jim Godfrey was pleased with the results from the bond sale.
“And that means savings for the taxpayers of our fair city, so it worked,” Godfrey said.
The council thanked Anhut and Moe for their efforts on the bond sale.
“Thank you, Caroline (Moe), for all your hard work,” Council Member Lisa Iverson said.