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(KNSI) — The Cold Spring City Council voted for a measure Wednesday that would give them the authority to raise as much as $9.7 million for a new fire hall.

Next is to post notice in the local paper about the proposal and a public hearing, likely to be held in late January. If there are only minimal objections, the city could then proceed with design and other preliminary steps.

Jessica Green of Northland Securities explains the options if a petition is successfully lodged against the project. “If you receive a petition and the signatures equal at least 5% of those that voted in the last general municipal election, you then have some options. The council can take it to an election. If it comes back that the community is not in favor, then you have to sit out a period of 180 days before you propose the same project with the same dollar amount.”

Another option is to not call a special election at all if a petition is received. That would table the issue for a full year. On the flip side, if voters approved the issue in a referendum, the council would have the right to move forward.

The current budget for the building is set at only around $8.6 million, but if the project uses funding from the federal government, an extra step is involved that raises the overall cost.

Green says, “With USDA [United States Department of Agriculture] financing, they do not finance the construction of the project. So, they require that communities go out and seek temporary financing for the construction period, and then once that construction is finished, they would come in and take out that temporary financing with their long-term financing.”

The construction loan is interest-only and would equal about $1 million in additional payments using today’s rates, as the construction period is expected to cover about three years. Green presented on what that would mean using today’s interest rates, saying if USDA financing were used, the interest payments for the construction loan would be capitalized and folded into the long-term loan once the building was opened.

USDA financing comes with a lower overall interest rate and can last for up to 40 years versus the standard 30-year term for Capital Improvement Plan bonds. The 3.75% interest rate and a 40-year term would lead to a total payments of over $18 million in principal and interest. The annual cost would be $456,600.

If the city uses general obligation bonds, it can only spread the payments over 30 years, and the interest rate is higher (currently at 4.07%). They could be issued at the start of construction, saving on capitalized interest.

Combined with the shorter term, the overall amount the city would have to pay drops to about $15,291,000. The annual payments would be about $70,000 higher, at roughly $526,000.

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