The city of Morristown had the anticipated favorable result in a bond sale Thursday morning to fund the construction of the community center, which will be built in West Morristown, south of the Merchants Greene development.
Robert W. Baird & Co., an American multinational investment bank and financial-services company, submitted the best bid package. The company offered a 2.75%, 30-year fixed interest rate for $37.25 million in debt, according to Joey Barnard, assistant city administrator.
The latest cost estimate for the community center is $36 million. The money will come from a recent 25-cent city property-tax increase. Prior to Thursday’s bond sale, Morristown City Council members authorized issuing up to $37.25 million in debt.
“We’re pleased with the rate,” Morristown Mayor Gary Chesney said this morning. “It came as expected, and we believed it puts Morristown in a good position.”
Interest rates are at or near historical lows, and Morristown government, which is also responsible for debt incurred by Morristown Utility Systems, has been converting millions of dollars of variable-rate debt, which is lower than 2.75%, to lock in rates that almost certainly will rise over the next three decades.
Following closing, which councilmembers will address at their Nov. 19 meeting, city government will take possession of all $37.25 million at one time. Barnard says city officials have not yet decided how the money will be invested during the community center construction period.
The bids for the community center will go out in the spring. Construction is expected to take about 18 months.
Barnard says the 2.75% interest rate city government got is significant for another reason.
Hamblen County has a bond rating that’s identical to Morristown’s, according to the assistant city administrator. Hamblen County is contemplating an $85 million bond issue to fund construction of a new jail and school upgrades.
While the terms and size of the bond issue or issues could impact the interest rate Hamblen County gets, 2.75% is better than a ballpark estimate for county government, according to Barnard.
There’s a petition effort afoot to put Hamblen County’s bond issue on the March 2020 ballot. If ballot-initiative supporters get the signatures of 10% of registered Hamblen County voters – 3,326 – by the Nov. 14 deadline, the decision will go to voters.
Should Hamblen County residents reject the bond issue and county commissioners reopen discussions on the size and location of the jail and what school improvements will be funded – issues that at one point appeared to be settled – it’s unclear when Hamblen County government would issue the debt.
Not only could interest rates rise, officials say, there’s always the specter of a federal judge ordering Hamblen County government to build a jail to his or her specifications at a location of his or her choosing, which is what happened in Grainger County when commissioners there failed to replace a substandard jail.
Hamblen County currently has six jail-related lawsuits pending in U.S. District Court in Greeneville.