Sequim picks City Hall bond underwriter

By Joe Smillie
Peninsula Daily News

SEQUIM –– D.A. Davidson & Co. has been selected to underwrite an estimated $10 million in bonds for construction of a new City Hall/police station on Spruce Street.

D.A. Davidson was one of four firms invited to market the city’s bonds.

It quoted an underwriting spread, essentially the firm’s profit, of $3.80 for every $1,000 of general obligation bonds and $3.95 per $1,000 for revenue bonds.

Administrative Services Director Elray Konkel recommended Monday that the city go with D.A. Davidson, which quoted the lowest underwriting spread, and the council approved that unanimously.

Konkel said D.A. Davidson is also a good fit for handling the city’s bonds because the firm has a great deal of experience in municipal bonds, especially in Clallam County, and an office in Port Angeles.

Also bidding to underwrite the bonds were KeyBank, Martin Nelson & Co. and U.S. Bancorp.

KeyBank quoted $4.919 per $1,000 for both general obligation and revenue bonds; Martin Nelson bid $3.90 per $1,000 for general obligation bonds and $4.94 per $1,000 for revenue bonds; and U.S. Bancorp quoted $7.999 per $1,000 on general obligation bonds and $7.034 per $1,000 on revenue bonds.

Tentative $15 million

The city will issue general obligation bonds to fund construction of the new civic center, for which the city is tentatively planning to pay a total of $15 million.

The bonds would be repaid from savings on rent the city currently pays to house civic departments such as public works, police and planning in other buildings around town, as well as proceeds from the public safety sales tax and real estate excise tax proceeds.

City officials have saved nearly $2.5 million over the past several years to help pay for the new building.

Sequim doesn’t currently have a bond rating, Konkel said, because the city hasn’t hit the bond market since the late 1990s.

The city is set to present to Standard & Poors on a bond rating July 12, Konkel said. He said underwriters have estimated the city will get a bond rating of A or A plus.

Also Monday, the council gave Konkel and City Manager Steve Burkett the go-ahead to plan to pay a portion of the building’s construction costs with cash from the water and sewer funds.

Konkel said there is enough cash in each of the funds to provide $1.25 million from each.

Doing so, Konkel said, would save the utilities nearly $1 million in borrowing costs.

Konkel said the sewer fund currently has $5.2 million in cash; the water fund has $4.7 million.

“If you have the cash in the bank, it’s always an option and a way to save money,” he said.

Burkett and Konkel will further research the funding option and return to the council with more information at its next meeting June 24.

The council meets at 6 p.m. the second and fourth Monday of each month at the Sequim Transit Center, 190 W. Cedar St.

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Sequim-Dungeness Valley Editor Joe Smillie can be reached at 360-681-2390, ext. 5052, or at jsmillie@peninsuladailynews.com.

Last modified: June 11. 2013 5:42PM
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