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Events Center: A Smart Investment For You?

November 15, 2011, 6:28 AM by Austin Hoffman

Events Center: A Smart Investment For You?
By this time in 2014, you might be front row at some concert at the new Events Center. Now, it's time for the city to put the money together to pay for it.

It will be using bonds for the $115 million project.  But what does that mean for you?

A bond is a way for a company, or the city in this case, to borrow money and then pay it back with a certain amount of interest on top of it. It's a long-term investment that some say might not be too bad of a deal.

"We expect that the bonds will probably be ready to be marketed in early January although the bonds will probably be available in mid December.  But because of all of the activity surrounding the holiday season, it will probably be postponed till early January," financial advisor Neil Graff said.

Graff says once they're on the market, they will be available for you to purchase. But it's not as simple as calling the city and buying them.

"If an individual is interested in one or more of these bonds, they would have to find an entity that would have the bonds available to them. And again, typically, it's going to be large banks or large brokerage companies that have purchased blocks of these bonds form the bond houses out on Wall Street," Graff said.

He says Sioux Falls has an Aa2 credit rating which is right on the top of the hierarchy. For you, that means it's actually a very safe investment to make.

"We expect them to have a yield or an interest rate of somewhere around 4% or maybe slightly below 4% and that’s on a tax-free basis. So in today’s investment environment, that’s a pretty good rate," Graff said.

And much more stable than putting money into stocks. But there is a down side. Interest rates are at some of lowest in history and they will eventually go back up. So waiting for better rates might also be a good idea.

"Something people want to consider is do they want to lock into these bonds at that 4% or slightly below 4% for the next 22 years with the thought that interest rates might rise in coming years and there will be better deals or better opportunities out there that might be better than this," Graff said.

We don't know the exact parameters of the bonds yet, but the city says they'll be making all the final decisions very soon.

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