Stillwater News Press

September 23, 2013

City councilors receive lesson on municipal debt

By Nick Woodruff
Stillwater NewsPress

STILLWATER, Okla. — Stillwater city councilors received a primer on municipal debt during Monday’s City Council work session.

It was an appropriate time to review general obligation bonds and revenue bonds as the city may be selling municipal bonds to finance $27 million worth of recreation and public safety improvements if voters approve propositions on the Nov. 12 ballot.

The city may also be considering a bond sale to build a power generation station to replace the Boomer Lake Station.

Stillwater’s Chief Financial Officer Marcy Lamb delivered an approximately 50 minute presentation on bonds.

The three reasons a city sells bonds are to finance improvement projects, fill a short-term need or refund bonds, which is similar to refinancing a loan, Lamb said.

A city can seek two types of bonds — a general obligation bond and revenue bond.

A municipality pledges to levy taxes to repay a general obligation bond. The bonds are usually repaid within a specified time limit, i.e. 10 years or 20 years, when they are issued.

Municipalities also issue revenue bonds. Municipalities designate a specific funding source for these bonds. The money may come from rate or tax increases.

In Stillwater’s case, the repayment option to issue revenue bonds to build a new power generation station will come from the city’s electricity contract with the Grand River Dam Authority.

The GRDA promises to purchase up to $4.5 million of electricity annually from the city if the new station is built.

Stillwater officials will have to wait until November before they will know if voters approved general obligation bonds for recreation and public safety.

They may not have to wait that long to get started on a power generation station.

City officials are moving forward with the power station project. The City Council will receive credit rating presentations within the next couple of weeks.