County should issue highway bonds
With interest rates so low, Becker County isn't making a lot of money investing its reserve funds, but there is one way the county could benefit from low interest rates -- issue bonds for highway projects.
Its neighbor to the west, Clay County, has gone that route, and expects to save well over $1 million, and perhaps much more, by taking advantage of interest rates hovering around 1.2 percent, according to Clay County Highway Engineer David Overbo.
Clay County will essentially do all the projects in its five-year construction plan in just three years.
And it is doing additional projects that weren't even on its road plan, but very much needed to be done.
Clay County conservatively expects to save about $1.3 million just in economies of scale and avoiding construction inflation, which MnDOT says is now running at about 4 percent a year.
Overbo is excited about the plan, and says that's just part of the savings.
County Road 17 south of Glyndon, for example, will now receive a $1.25 million medium-grade asphalt overlay, lasting 10 to 12 years.
Without bonding, the project would have had to be put off several years and would have required reconstruction of the highway, at a cost of $3 million to $5 million.
A lot of money can be saved by catching roads before they need extensive reconstruction.
And bonding will allow the county to fix roads that badly needed it, but were not even on the five-year road plan -- like Clay County Road 52 between Barnesville and Moorhead.
"The road is falling apart ... Without this bond, it might have been many, many years before we got this work done," Overbo said.
The county will save money on economy of scale by expanding the scope of projects -- paving 5 or 6 miles instead of the 1 or 2 miles that would have done had the bonding not been approved by the county board.
On Tuesday, Clay County sold $10.6 million in state aid general obligation bonds, the most it can legally borrow for the purpose -- based on its state aid gasoline tax allotment for 2011 and 2012.
This year it will do asphalt paving projects. Next year will be grading work and in 2015 concrete paving work.
The bond will be paid back within 6 years.
Clay County will be far enough ahead that it won't be doing any state-aid construction projects during the 'pay-back" period the last few years of this decade.
Instead it will do smaller county projects -- catch up on right-of-way work and do flood stage mapping and pavement management work.
The only downside is that "we're going to be extremely busy," for the next three years, Overbo said. "We're probably going to need some additional county staff."
Wilkin County is expecting a relatively quiet year for projects, and Clay County may borrow some techs or ask MnDOT to help with project inspections.
The design phase has gone well and if the construction phase also goes as well as expected (and interest rates remain low) Clay County may well bond again in a few years, Overbo said.
Becker County is equally well placed to benefit from highway bonding: Its construction budget is also stretched, and the need is greater than the money available to meet it.
Thanks to sound management, Becker County has a good credit rating and a low debt load.
Bonding for highway improvements is something the Becker County Board should strongly consider.