Sioux Falls, SD
Borrowing $115 million doesn't come cheap.
Starting Monday night, the Sioux Falls City Council is going through the process of issuing the bonds to pay for the events center project that was approved by the voters.
Even though the ballot said the events center would cost $115 million that is only for the cost to design and build the facility. The city will actually have to borrow about $125 million for the project.
The majority of that money will be set aside in a reserve account just in case the city misses a payment, but if the city doesn't, the money will be used as the final payment for the project.
"That money will sit there until the very last bond payment is due and then that amount is used to make that final bond payment. It doesn't really represent a cost at all to the city. It's not money that's going to have to be repaid using tax dollars," Sioux Falls Finance Director Tracy Turbak said.
The city of Sioux Falls is borrowing all the money to build the new events center, and if there was any time to finance a major project like this, officials say it would be right now.
"Looking at it purely from a financing stand point, we could not have picked a better time to build this project and finance it," Turbak said.
Turbak says just like re-financing your home, the city is taking advantage of low interest rates. The ordinance the city council is considering caps the interest rate at 4.75 percent.
"What we're seeing this year is just unheard of. People that have been in this business for 50 years have never seen rates as low as they are today," Turbak said.
Despite those low rates, the city is forecasted to spend nearly $173 million on the project by the time the events center is paid off in 2033.
"Which translates to about $58 million in interest costs, or about half the cost of the project. If you relate that to a typical homeowner that takes at a 30-year mortgage, often times you'll pay twice the cost of the purchase price of your home over the life of your mortgage," Turbak said.
The bond payments will build up gradually and be about $9 million a year by 2017. Here’s a complete list of the payment schedule.
|YEAR ||NET ANNUAL DEBT SERVICE |
|2012 ||$4,197,000 |
|2013 ||$4,594,000 |
|2014 ||$5,893,000 |
|2015 ||$6,886,000 |
|2016 ||$8,962,000 |
|2017 ||$8,962,000 |
|2018 ||$8,962,000 |
|2019 ||$8,963,000 |
|2020 ||$8,962,000 |
|2021 ||$8,963,000 |
|2022 ||$8,964,000 |
|2023 ||$8,959,000 |
|2024 ||$8,963,000 |
|2025 ||$8,961,000 |
|2026 ||$8,963,000 |
|2027 ||$8,960,000 |
|2028 ||$8,962,000 |
|2029 ||$8,962,000 |
|2030 ||$8,961,000 |
|2031 ||$8,962,000 |
|2032 ||$8,866,000 |
|2033 ||0 |
|TOTAL ||$172,763,000 |