LEWISTON – City Administrator Jim Bennett hopes the brightening financial news holds for just a little longer.

Sometime in the next couple days, the city intends to file notice of a $29 million bond, $19 million of it earmarked to build a new elementary school to replace the aged Pettingill facility.

“I believe it’s not a matter of if we’ll be able to sell the bond, but what the impact will be on the taxpayer,” Bennett said Monday.

That’s a lot more secure than the scenario he and other municipal administrators faced two weeks ago when the state was unable to price a $50 million transportation bond because of unusually high interest rates. Bonds are loans municipalities use to finance large capital projects such as schools and roads. Rates have been well below 5 percent for most of the past 10 years.

Bennett said nerves continued to fray until last Friday when Congress finally endorsed a rescue bill for the nation’s ailing financial institutions.

“If you had called me Tuesday or Wednesday asking about the status of our bonds, you would have heard a very different pitch in our voices,” he said. “We didn’t know if anything could be done.”

Now bonds are moving again. On Monday, Robert O. Lenna, executive director of the Maine Municipal Bond Bank, successfully sold $103 million in bonds, ranging from 1- to 30- year terms. That will provide financing for 19 projects from smaller communities that don’t have their own bond ratings. The average interest rate for a 20-year bond was 5.25 percent.

“Considering the status of credit markets here and in Europe, I feel pleased,” Lenna said. “That’s a competitive interest rate.”

He said the MMBB will put together another schedule of bonds to sell the week of Oct. 20 – the same date Lewiston is eyeing to float its bond – to finance the transportation projects that couldn’t be bonded two weeks ago.

“There wasn’t a market then; now there’s a market,” he said.

Key to those sales is Maine’s solid credit rating and the tax-exempt status of those bonds, said Lenna. Of the $103 million sold Monday, between 92 and 95 percent went to Maine-based investors, he said.

Bennett hopes Lewiston will have the same luck or better. The city normally bids its bonds in the spring, but delayed this year because of the school project. A $9.4 million note on the project is due to be paid by the end of the month.

Richard Metivier, Lewiston finance director, said the city was trying to align its funding cycle for the new Geiger elementary school with the state’s, which is reimbursing 96-97 percent of the costs. Work began on the school last spring; it is expected to open in the fall of 2009.

“By Wednesday we’ll make a decision about whether to put the bond out on the market,” Metivier said. “If we don’t issue it, we would need some temporary financing to pay off the $9.4 million note.”

Citing similar concerns about the financial markets, officials from the state Department of Education announced Monday that they would be delaying the bidding of bonds for 12 school construction projects in order to free up money for educational programs. A new K-8 school in Durham and two projects in Farmington – a new school and a renovation to Mount Blue High School – will be delayed.

Metivier acknowledged that it’s a dicey business, trying to predict what the markets will do to time the bonds. He and Bennett have been working up contingency plans, studying bond market trends to give the city its best advantage.

General obligation bonds are generally awarded to the bidder with the lowest interest rate. Both men are hoping the demand for Maine paper will continue through the month, ensuring healthy competition for the $29 million bond.

“In Sudbury, Mass., there were six bids for a $6 million bond, so apparently there’s still a market,” Metivier said of Monday’s municipal bond market.

Over the river in Auburn, city hall staff are a little more relaxed. They floated a $6.4 million capital improvement bond on Sept. 23 at a little over 3.6 percent interest.

“We’re very concerned about the economy, but not from a bonding perspective,” said Laurie Smith, assistant city manager. “The city’s finances depend on residential and commercial property taxes, and if people aren’t doing well, it will impact cash flow and revenues. So there’s concern, but not around bonds.”


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