Sale of $18.7M in notes calms officials' concerns

10/11/2008

Toledo officials are more confident after the sale of $18.7 million in short-term notes for capital projects that the city will weather the financial crisis and deterioration in credit markets better than some other cities across the nation.

The sale comes at a time when states and cities have delayed major improvements and scrambled to adjust plans in the wake of the credit freeze that has reduced the number of buyers of municipal securities. The $2.6 trillion market for state and city bonds has been frozen since the collapse of Lehman Brothers last month. 'A lot of the municipalities are having problems because they are in a variable-rate environment and they can see the variable rate double overnight,'

Toledo's finance director, John Sherburne, said. 'If you have gone from 5 percent to 7 or 8 percent, that reduces the amount you have to do projects with.'

City Council on Tuesday increased the amount the city is willing to pay in interest

from 5 percent to 6 percent to be competitive with other cities.

On Thursday, the city then sold the $18.7 million in notes for capital improvements at 4.4 percent. Mr. Sherburne said the city historically has sold such notes at 2 percent to 3 percent. The increase will cost the city about $100,000 in extra interest, he said.

'A lot depends on who you are and your financial health, and what you are issuing your debt for,' Mr. Sherburne said. 'There have been a couple of articles in the Wall Street Journal about cities facing huge problems and may even go bankrupt.

'The amounts financed by the Finkbeiner administration with the sale of notes and the projects are:

• $2,095,000 for construction and reconstruction of sidewalks.

• $525,000 for improvements to the city's storm-water drainage system.

• $525,000 to buy solid waste equipment.

• $4,690,000 to buy vehicles and equipment for the city's Streets, Bridges, and Harbor division.

• $770,000 for parks, recreation, and forestry equipment.

• $155,000 for improvements to Blackstone Drive from Homer Avenue to Manhattan Boulevard.

• $10 million for Martin Luther King, Jr., Bridge improvements.

'We are obviously cautiously optimistic and we won't be back into the market for five or six months and some of the things the Fed has done has calmed some of the people we deal with,' Mr. Sherburne said.

Councilman George Sarantou, chairman of council's finance committee, is pleased Toledo has been able to avoid putting off projects, unlike Broward County, Florida, which delayed plans to borrow $170 million for new sewer and water lines. 'I know of no instance we have not been able to sell notes or bonds and we are not going over our debt limit,' Mr. Sarantou said.

Contact Ignazio Messina at: imessina@theblade.com or 419-724-6171.