Financial advisor outlines bond scenarios as commissioners weigh sinking fund and budget cuts
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Summary
DA Davidson presented multiple hypothetical bond structures — annual one-year sales versus larger multi‑year sales — as the board considered a newly created sinking fund and budget pressures, with commissioners asking staff to draft a broad bond resolution for flexibility.
Paul Grigor of DA Davidson presented hypothetical bond scenarios to the Lincoln County Board of Commissioners on Sept. 8, showing trade-offs between issuing a series of short-term, one-year bonds and issuing a larger, multi-year bond the county could draw on over several years.
Grigor told the board the county could use an initial model with $6 million in borrowing as an example. One scenario outlined issuing $2 million annually in one-year bonds that would be paid off the following year; an alternate scenario showed a single $6 million issue amortized over three, five or seven years. Grigor said both approaches are feasible but carry different risks and interest-cost profiles. He noted IRS rules for tax-exempt bond proceeds expect the money to be spent within three years and said that longer amortization raises total interest costs. He also said local governments generally can access capital markets and that the market at the time of sale will determine the interest cost.
Commissioners asked for pros and cons. Grigor said annual one-year issues are “legal” but unusual and carry the risk — albeit small — of changed market access in the future. He said a larger issue gives the county flexibility to issue bonds in one or more series (one sale or several sales over 1–3 years) if the resolution authorizes aggregate principal and not-to-exceed parameters. Grigor suggested a not-to-exceed resolution allowing multiple series would preserve flexibility for timing and market conditions.
Board discussion touched on timing, project useful life, and how bond proceeds would interact with the county’s property-tax request. Commissioners asked about interest rates; Grigor said municipal borrowing costs in examples were in the low-to-mid 4% range for five-year financings (example: a 40-million sale projected at ~4% borrowing cost in his example). He and commissioners discussed refinancing and prepayment options if rates decline.
Direction Commissioners asked staff (Becky and others) to work with Grigor and the county attorney to draft a broad bond authorization—one with parameters that would allow issuance in multiple series and not obligate the county to borrow. Becky and Grigor will refine scenarios and report back to the board prior to final decisions. The board signaled interest in giving staff flexibility on resolution language so final amounts, timing and amortization can be adjusted before any sale to market.
Why it matters Bonding is being considered because the county faces capital maintenance needs for roads and bridges and simultaneous budget pressures that limit the county’s ability to fund large projects from operating revenues. A sinking fund resolution adopted at the meeting creates a legal vehicle to hold or manage proceeds or payments tied to future debt decisions.
Ending Staff will return with a draft bond resolution that establishes not-to-exceed limits and allows the county to issue bonds in one or more series, plus follow-up cost estimates for alternative amortization schedules.
