Jan Dillow rates explanation

I just want to chime in on this concept of current low treasury rates and immediate plans to use the bond proceeds.

To simplify, the rate on our bond issue will be the sum of the treasury rate (the risk free rate) plus a premium (or spread) based on the additional risk of the issuer and liquidity. I agree that treasuries are not likely to rise in the near term — the fed has basically told that to the world — but the risk spread that a municipality that is susceptible to sea level rise (SLR) will have to pay is likely to increase a great deal over the next few years.  The increase in this spread could swamp (no pun intended) the impact of continued lower treasuries. This is bc localities across the country that are susceptible to SLR and flooding will need to issue debt to pay for infrastructure to help mitigate the impact of these events. The muni market is one of the smaller segments of the fixed income markets and to find buyers for all this debt, the spread to treasury will have to rise. Furthermore there is empirical evidence that the spread for SLR affected issuers has been widening versus non SLR communities since 2013. IMO that differential will continue to expand, as long as SLR is in the news. Finally, if the rating agencies incorporate SLR factors in their analysis our rating could decline based solely on geography, which would also increase the spread on our potential debt issue.

Aside from the fact that it will take at least 6 to 9 months to get a bond issued, given the long term nature of bonds, if the spread increases meaningfully — even if treasury yields stay the same — we would still be better off issuing now and keeping the money in the bank for a year waiting for a project rather than risk waiting to issue when there is a project on the table.  The cost to the community of a 1/4 point increase in the spread over the life of a hypothetical $100 million, 30-year bond is an incremental $7.5 million. It is an additional $15 million for a 30 year bond.

To me this is not a political issue, this is a timing issue.  If we as a community think we will need outside funding in the near future (for SLR resilience, flood control, water quality assurance or beautification) we should start the process now.