The County Commission has put St. Louis County taxpayers another $5 million in debt, but the obligation comes with near-record-low interest rates.
Tuesday, the board passed a resolution to sell $5 million in 2.3 percent capital equipment notes. State law permits the county to issue the notes without referendum.
Proceeds are to be used to buy capital equipment that has a useful life at least equal to the five year term of the notes. Covered purchases include public safety, ambulance, road construction or maintenance, medical and data processing equipment.
The new cash will enable the county to get equipment while freeing existing funds for other needs. The county is required to assure payment of principal and interest by a direct annual property tax. The interest will be $353,450.
The strategy has been debated by the board and particularly questioned by Commissioner Dennis Fink, who expressed concerns on using the notes as a revenue stream.
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But most reservations took a back seat as commissioners heard the favorable terms. Fifteen financial entities from all over the country bid on the notes. U.S. Bancorp/Piper Jaffray was awarded the issue.
The interest rate -- close to a 34-year low -- was attributed to the county's A-1 bond rating, a good market and the tax-exempt nature of the notes.
The resolution passed unanimously, but Commissioner Steve Raukar qualified the situation.
"The reality is we're borrowing money," Raukar said. "And at the same time, we will be having to dip into reserves. The reality is we're still in a downturn economy that requires borrowing."
Commissioners are currently struggling with an anticipated budget shortfall and the fear that the state could reduce or postpone its scheduled $13.4 million December aid payment if revenues decline.
"I'm unhappy with the concept and satisfied with the results," Fink said about the equipment notes.
In other action, the board approved an agreement with the Community Health Board for tobacco prevention activities and tabled proposed amendments to the Social Service Act Plan.
Meeting in committee, commissioners also approved the low bid for improving a five-mile stretch of Rudy Perpich Memorial Drive (CSAH 4) between County Road 340 and County Highway 111. KGM Contractors of Angora came in with the low bid of about $2.95 million, 1.3 percent under estimates. The project still requires federal approval.
