Gail Borden Library looks to reduce bond costs

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Updated: March 20, 2012 8:08AM

ELGIN — By doing a negotiated bond sale to reduce the cost of bonds sold for the $24 million Gail Borden Public Library, opened in October 2003, the Library District could save at least $300,000 over the next 10 years.

The Library Board, on a 5-2 vote this week, approved going forward with that negotiated sale. Board members Peggy Wegman and Randy Hopp voted against the sale, with Wegman saying she was more in favor of a sale on the open market versus one negotiated with Edward Jones Financial.

District voters approved a $28 million bond issue in November 2000 to finance the new library in downtown Elgin — $24 million for the main library and $4 million for the southwest-side Rakow Branch. The branch bonds were sold in 2005, in advance of that building’s construction.

The district board sold the $24 million in bonds for the library at 270 N. Grove Ave. in two sales — one for $20 million in 2000, and a second for $4 million in 2002, said Karen Maki, assistant director.

The second, $4 million bond has an interest rate of 4.8 percent, said Raphaliata McKenzie of Speer Financial. But current interest rates are in the low 2 percent range.

With a negotiated sale, the library district could save between 8 percent and 12 percent in its current interest cost, McKenzie said. The target for that bond sale is a minimum of 8 percent savings, she said.

But if the library instead went on a sale in the open market, the district would be locked in to interest rates on that day and could see far less savings, according to McKenzie.

Also, if the bond market is not favorable on the date set for the sale, the library district can back out and not refinance the bonds at that time, she said.

“Because you are negotiating the bond issue, if the savings are not what you want, we can wait. That is the flexibility you have with a negotiated sale,” McKenzie said.

“With an open bid, if the market changes … now your savings may not be $300,000. It might be $250,000. If the savings are not favorable, we will withdraw your bid and not move forward with the sale,” she said.

The library previously refinanced the $20 million bond sale back in 2004, Maki added.