On December 17, 2024, the Emporia City Council unanimously approved the issuance of nearly $10 million in general obligation bonds to fund significant capital projects. David Rose, Senior Vice President and Manager of Public Finance at Davenport and Company, LLC, presented the bond terms to the council.
Bond Details and Structure
The investment banking firm Crews and Associates proposed a $9.5 million general obligation note with Capitol One Public Funding. The key terms are as follows:
| Term | Details |
|---|---|
| Principal Amount | $9.5 million |
| Interest Rate | Fixed, not exceeding 4.81% |
| Maturity Period | 10 years |
| Payment Structure | Interest-only payments for the first 4 years; level debt service payments for the following 6 years |
| Prepayment Options | Beginning December 2025, with a 1% penalty ($100,000); penalty decreases by 0.25% annually until December 2029, after which prepayment incurs no penalty |
Rose highlighted that the city’s strong financial reserves contributed to the favorable terms offered by Capitol One Public Funding.
Allocation of Funds
The bond proceeds are designated for the following purposes:
- Reimbursement to General Fund: Approximately $4.5 million will replenish the general fund, which previously financed capital projects through inter-fund borrowing from the utility enterprise fund.
- Future Capital Projects: The remaining funds will support additional projects planned for fiscal year 2025.
Debt Capacity and Legal Limits
Emporia is authorized to issue general obligation debt up to 10% of its taxable real estate assessed value. Currently, the city can issue approximately $13 million in additional general obligation bonds without exceeding this limit. With the new $10 million bond, Emporia’s remaining debt capacity will be about $3 million.
Council Decision
The city council unanimously passed a resolution to issue, sell, and award general obligation bonds not exceeding $10 million.
Extension of Existing General Obligation Note
In a prior meeting on November 19, 2024, the council unanimously approved extending a $6 million general obligation note with Truist Bank, originally issued in 2020 and set to mature on December 1, 2024.
The city had intended to secure permanent financing through Virginia’s State Revolving Funds loan program for water and sewer infrastructure projects. However, delays in annual financial audits since the fiscal year ending June 30, 2021, impeded access to these funds.
City Manager William Johnson III indicated that the fiscal year 2023 audit, due nearly a year ago, was expected to be completed by December 19.
Terms of the Extension
Truist Bank offered two extension options:
- One-Year Extension: Interest rate of 4.79%
- Two-Year Extension: Interest rate of 5.13%
The city chose the two-year extension, allowing prepayment without penalty, with the note now maturing on December 1, 2026.
Understanding General Obligation Bonds
General obligation bonds are municipal bonds backed solely by the credit and taxing power of the issuing jurisdiction, without specific collateral. They are issued with the expectation that the municipality will repay the debt through taxation or revenue from projects.
Implications for Emporia
The approved bond issuance and note extension enable Emporia to proceed with essential capital improvements and infrastructure projects, ensuring the city’s growth and development while maintaining financial stability.
What are general obligation bonds?
General obligation bonds are municipal bonds backed by the credit and taxing power of the issuing authority, without specific collateral. They are repaid through taxation or revenue generated by the municipality.
How will Emporia use the $10 million bond funds?
Approximately $4.5 million will reimburse the general fund for previous capital project expenditures, and the remaining funds will finance additional projects planned for fiscal year 2025.
What is the interest rate for the new bond?
The bond carries a fixed interest rate not exceeding 4.81%.
