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Posted on: April 18, 2022

City to Access Municipal Bond Market Ahead of Coming Rate Hikes

Bonds

CITY TO ACCESS MUNICIPAL BOND MARKET AHEAD OF COMING RATE HIKES

Like other cities with sound finances, Spring Hill can access the municipal bond market to help pay for capital-intensive roads, public works, and construction projects. 

Given the near-certainty of multiple interest rate hikes this year, the City seeks to obtain funds sooner than originally planned to reduce the cost of money. Among the near-term objectives is construction on phase one of the Buckner Lane South widening project this summer. This time last year, a AAA-rated, 20-year municipal bond paid approximately 83 basis points. A week ago, it was about 223 basis points. (A basis point is 1/100th of 1 percent.) 

Here is the approximate additional cost of financing Spring Hill’s proposed $40 million, 20-year bond issue at higher rates:

10 basis points: $420,000
15 basis points: $633,000
25 basis points: $1,000,000

These funds can be accessed over multiple years. There are several important projects in the Capital Improvement Plan (CIP), including a new police station, completion of the I-65 interexchange, Bucker Lane, and improvements to the Buckner Lane/Port Royal Road intersection. 

A notice detailing the Board of Mayor and Aldermen’s approval of this debt issuance was printed in the Tennessean newspaper.

The BOMA has adopted this approach. But Spring Hill residents can say no to bond issues. Residents have 20 days from the posting to present a petition signed by at least 10 percent of registered city voters.

Recently experienced rate increases with the certainty of increases in the near future provide good reason to access markets now rather than later.

The anticipated bond sale is May 11. 

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