City of Sedalia, Missouri completes successful public offering amid COVID-19 pandemic

The City of Sedalia, Missouri recently sold $28.61 million of certificates of participation (COP) through a public offering with approximately $25.2 million earmarked to fund the construction of a new Heckart Community Center. The remaining funds will be used to refund series 2012A COPs that will result in average annual cash savings of about $25,000 over the remaining 12 years of the refunded COPs. This will provide the city with a net present value (NPV) savings of over 4%. Stifel Nicolaus was the underwriter, with Gilmore Bell serving as the city’s bond counsel, and Baker Tilly serving as the municipal advisor to the city in the transaction.

How did this successful sale take place during a pandemic?

• A generous contribution from a community donor will pay the interest on $20 million of the COPs.
• With this pledge, in August 2019, the city asked citizens to vote for the removal of a sunset on a one-half-cent capital improvement sales tax. This, along with a one-eighth-cent increase in Sedalia’s parks and recreation sales tax rate approved by the voters, will be used to pay debt service on the COPs. Both of these measures passed with overwhelming support (approximately 80% in favor with a high voter turnout).
• The local school district is also involved through contributing $6.46 million toward the project. The portion of the funds from the school district will be allocated to the construction of an indoor aquatic center, which will include an eight-lane, competition-style swimming pool with a separate diving pool to support the district’s swimming and diving program, as well as a generous-sized leisure pool.

The COPs were sold after a tumultuous bond market throughout March and April 2020. Going into 2020, the bond market looked very strong with an expectation of favorable interest rates. However, as time went on, various economic situations, including COVID-19, occurred that forced the team to delay the sale from April 7, 2020, to May 15, 2020. To complete the sale effectively, Kelvin Shaw, Sedalia’s city administrator, worked with Baker Tilly Municipal Advisors to assist the city council in structuring the financing. Shaw also worked with Baker Tilly’s municipal financial advisors and market specialists who watch the market very closely to determine the optimal time for the sale.

The COPs were rated A+, mature over 25 years and have a true interest cost of 2.908%.

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