By Paul Snyder
The Daily Reporter
MILWAUKEE, Wis. — The La Crosse County Board of Supervisors is gambling that an uncertain municipal bond market will be the best way to pay for its new $29.5 million jail expansion.
A week after County Administrator Steve O’Malley proposed selling municipal bonds to pay for the remaining $19.5 million in project construction costs, the board Thursday informally agreed to the plan.
“The idea was to make sure they were comfortable,” O’Malley said of county board members.
Although supervisors last week expressed trepidation at relying on such a volatile market to pay for the La Crosse County Law Enforcement Center, they said the numbers they heard Thursday convinced them.
“We were told the interest rate we could expect would be 3.67 percent if we went to market and that could save us about a million dollars in interest over 10 years,” said County Supervisor Tom Rauk.
The idea last week was to invest the $19.5 million balance in a 20-year bond next month, but O’Malley suggested a 10-year balloon payment plan, which would yield lower interest rates. The 20-year bond would have brought a 4.44 percent interest rate.
Rauk said estimates indicate the county likely will be able to pay back $12 million of the $19.5 million in 10 years, and it can refinance the balance at that time.
“The opinion of the board was generally favorable, but still not entirely certain,” he said. “This is a very volatile market, and rates can change in a meaningful way daily. “
The county is scheduled to sell the bonds Feb. 9, and Rauk said if the interest rates are above the expected 3.67 percent that day, they can rethink the plan.
County Supervisor Bill Brockmiller said using the bond market to repay construction costs is the best option for the county.
“Ideally, you’d like to have enough space already and not have to build,” he said. “But we don’t have a choice. Now, there’s some speculation that this big federal stimulus package could end up causing inflation. That remains to be seen, but if it does happen, then interest rates are going to go crazy and we’ll all come out looking like geniuses. “
When the County Board approved the project last year, supervisors agreed to a $10 million state loan to cover initial construction costs at the center. O’Malley said it is unlikely the state will loan the county any more money for the project, which will increase the jail’s capacity by 108 beds and include room for future expansion.
Rauk said the county ultimately should pay the loan in the most fiscally responsible way possible.
"(Going to the bond market) is more than a wild guess, it’s quantified speculation,” he said. “Yes, we’re hoping the chaos and turmoil of the future is limited, but we have a chance for good return. "
Copyright 2009 Dolan Media Newswires