Casco to select bonding agent in late September

CASCO — Fifteen years ago, the Town of Casco hired Richard Ranaghan to guide it through the bonding process for the purchase of public safety equipment.

Twenty-five years ago, the town engaged bonding agent Joe Cuetara to help it through the steps of taking out a bond for its financial needs at the time.

Now, the town plans to borrow $3.4 million to pay for several infrastructure improvements and a land purchase.

The Casco Board of Selectmen heard a presentation by Ranaghan, the president of Northeast Municipal Advisors, LLC, on Tuesday, three weeks after Cuetara spoke to the selectmen.

The board’s plan is to choose one of the two bonding agents during its next meeting on Sept. 27.

At the end of Tuesday’s meeting, the board discussed with the town manager the two options.

“I have experienced twice in my professional career” the issuing of a bond, Casco Town Manager Dave Morton said. “For all the reasons both shared, either (bonding agent) is better than Maine (Municipal) Bond Bank.”

The MMBB only issues bonds in the fall and spring, and also is better for smaller sums of borrowed funds, he said.

Morton said that he would prefer to refrain from publicly stating which bonding agent he favored — if indeed he had a preference.

Chairman Holly Hancock weighed in on the topic.

“Their presentation was different, but, their knowledge of the bond process is there,” Hancock said. “Short of rock-paper-scissors, I’m not sure which to choose.”

Selectman Thomas Peaslee agreed. “Both would do a good job,” he said.

Hancock said she planned to reach out to the town’s bond counsel, Attorney Ronald A. Epstein, with the law firm Jensen-Baird-Gardner-Henry. According to the law firm’s website, Epstein is “active in public finance and is a member of the National Association of Bond Lawyers.” Additionally, Epstein has worked with the two bonding agents the board are considering.

During his presentation, Ranaghan provided the board with a timeline in order to have the $3.4 million bond issued by July 2017.

Next summer in July is when the town will have to pay off the Bond Anticipation Notes (BANs) which were taken out to cover the costs of the town hall construction and the land purchase.

According to Ranaghan, the majority of the work would start 12 weeks before the bond is issued. (Although he did say he would start work immediately putting together the basic portfolio on the town’s finances and money management.)

First, Northeast Municipal Advisors would work with the town to gather information to get the best bond rating. A better bond rating means lower interest, he said. He would go to Boston for a face-to-face meeting with a bond rating committee on the behalf of the town.

Once the town receives a rating, Ranaghan would put the bond request out to bid.

Recently, Ranaghan has worked with the Town of Raymond to get a triple-A rating and, with the Town of Gorham to achieve an AA rating.

Once the Town of Casco gets a credit rating — which is published nationally, it is “time to go to market,” Ranaghan said.

“We will receive bids. The lowest underwriter is the one we will go with,” he said.

Once the bond is issued to the town “you can reimburse the fund balance and pay off the BANs,” he said.

He talked about terms for paying off the bond. By law, 30 years is the maximum amount of time a municipality can take to repay a bond, he said. However, a large bond can be split into smaller amounts that have different lifespans — or numbers of years to be paid off, he said.

“Bond issues do cost money. It is between $30,000 and $35,000. It depends on the size of the bond. It’s about $10,000 for the job; $10,000 for getting a rating; and there are other incidental costs,” he said.

Some of those incidental costs include paying off the bond holders and the printing of the bond, he said.

“There are two ways that a town can pay for its issuance costs: Either out of bond proceeds — it’s the soft cost for doing financing. Or, the town could budget issuance cost into its budget,” Ranaghan said.

According to Morton, the town plans to use a small percentage of the bond to pay for the incidental costs of taking out the bond.

Following the presentation, Ranaghan opened up the floor for questions.

Chairman Hancock asked for a clarification on when the firm would begin if it were selected for the job.

“You are saying that you would gear up in the spring for July closing,” she said.

He answered, “If we were engaged, we would start now. I would like to have a discussion with the town manager and town staff. If the best plan is next summer, we would gear up 12 weeks before that.”

Hancock asked another question.

“For the bonding that we are talking about, what is the estimated of amount of time of our town office employees and the town manager,” she said.

First, Ranaghan outlined what must be done before giving an estimation of time involved.

“What we do is develop a check list, and assist the town staff in gathering data such as financial statements, and tax collection rates,” he said.

“Typically, 40 hours from town staff,” he said. “Two hours one week, eight hours the next week. The 40 hours is spread out over 12 weeks,” he said.

One item that should work in the town’s favor is the low interest rates, he said.

“We are in a very good rate environment. It’s 1.8 percent on 5 years to 2.5 percent on 20 years,” he said. “We are in a very attractive market. Most of the indications are that this market will remain for a while.”

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