During some financial house cleaning, the city of Clarkfield overturned some budgetary couch cushions to find a nice chunk of change, about $250,145 worth, laying around. At their regular meeting Tuesday, the Clarkfield City Council decided to use that money to pay off the remaining balance on a 2005 General Obligation (GO) Improvement Bond.
According to City Administrator Scott Weske, the surplus funds were accrued because Clarkfield has been over levying for their debt service while paying off GO bonds from both 1998 and 2005. That extra cash ended up in the city’s general fund.
The overage amount for the 1998 bond came to $159,343. Meanwhile, the amount of money pooled for the city to pay off their 2005 GO bond amounted to $90,802. Those two amounts totaled bring the surplus amount up to $250,000.
The extra $90,000 in pooled cash for the 2005 bond came specifically because the city levied more than the scheduled amount. The amount of the bond originally was for $411,000, with the city needing to levy for and pay back roughly $36,000 a year for 10 years. While the city should have been levying that $36,000 amount, they instead levied for about $51,000 for the past seven years.
The city has already paid off the 1998 bond that collected the $159,343 in overage. And the call date on the 2005 bond was February 1, 2011; meaning the council has been able to fully pay off that bond since that date.
Northland Securities, the brokerage firm for both the 1998 and 2005 bonds, relayed to Weske that the money is able to be re-allocated to whereever the city wants.
The council followed Weske’s recommendation for the money and passed a motion Tuesday night to use the money to fully pay off the 2005 GO bond, prior to February 1 of 2013, and transfer what is left back into the city’s general fund. The amount that the city expects to be remaining on that bond when it is paid off is about $201,000. That will leave just less than $50,000 to be cycled back into the general fund.
Weske expects, that by paying off the bond early, the city should save around $20,000.
“I guess it’s not such a bad problem to have,” said Mayor Gene Kockelman about the extra money Tuesday night. “It’s definitely not going to hurt our bond rating,” replied councilman Robert Schlenner.
It should be noted that the city is expected to take on new bonding measures soon, with needed updates to the city’s water and sewer infrastructure looming.
At their regular meeting Tuesday, the Clarkfield City Council voted to approve a draft of the city’s new water and sewer ordinance and scheduled a public hearing for their meeting on Tuesday, October 2 to review the document before the council votes to adopt it.