The City of Brazil is getting some help with its debts.
Mayor Ann Bradshaw confirmed to The Brazil Times recently the city has chosen First Financial Bank as the buyer of a General Obligation Bond.
General Obligation Bonds are used by states and local governments as a tool to also raise funds for various public works projects.
The bond, which was initially approved at a special meeting of the Common Council of the City of Brazil Oct. 21, is for a total of $990,000.
"We've worked well with First Financial Bank in the past and have taken out Tax Anticipation Warrants with them as well," Bradshaw said.
The interest rate provided in the bid from First Financial Bank starts out at 2.95 percent and maxes out at 4.8 percent by the end of the 10-year bond period. This bid was chosen over the only other one provided, which came from City Securities Corp., Indianapolis. City Securities' interest rate was proposed at 5 percent for the first payable year of the bond and 7 percent for the remainder of the term.
The bond will help bring the city out of a large debt, which Clerk-Treasurer Karen McQueen attributed to the sidewalk project and mismanagement of funds by previous administrations.
"The cost of the sidewalks became much more than the city initially expected," McQueen said.
"Also, in the past, the project was paid for out of city funds rather than taking out a bond or loan."
She elaborated by explaining Dan Hedden, CPA Principal for Umbaugh and Associates, Indianapolis, told both her and Bradshaw a bond had been needed for a long time.
Although the bond is for a total of $990,000, the city is responsible for paying $320,000 of it.
While the other $670,000 is coming through an interlocal agreement with the Clay County Redevelopment Commission as Special Taxing District Bonds.
From figures determined by Umbaugh, $122,406.11 in interest will accrue on the bonds during its 10-year term, which the city will also be responsible for paying, making the city's total repayment obligation $442,406.11.
"We will be paying a fiscal total incrementally each year," McQueen told The Brazil Times.
"It is scheduled to be paid by Jan. 15 each year starting in 2010, so we will be able to start figuring it into our budget."
Bradshaw added Sue Beesley, partner with Bingham McHale, LLP, Indianapolis, will be acting as bond counsel for the city.
In a Nov. 11 meeting, Hedden informed the council the bonds are essentially restructuring the city's debt and opens up the potential to create other streams of revenue.