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The City staff and advisors have been working hard to find affordable and responsible ways to finance the Downtown Master Plan. The good news is that they feel confident that they have identified the right tools with limited risk to do just that.


In summary, in June the City established a Bond Anticipation Note (BAN), enabling them to borrow up to $8.4M with a 20- to 30-year term that can be easily repaid with limited financial risk to the city or current residents. See the end of this section for a description of BAN tool.

The bond will finance the Town Green, some of the street grid recommendations, and several stormwater projects.



Davenport determined that the City could service an annual debt of $674K that would support an $8.4M bond.

In 2018, Davenport Public Finance, the city's public finance advisors, recommended the city issue a Bond Anticipation Note (BAN)to fund the Downtown Master Plan.

Amortized over 20-years at a 5% interest, the city could support an $8.4M bond. 


Today, interest rates would be closer to 3.5% versus 5% and the term of the bond would be more typically 30-years versus 20-years. 


On a 30-year term at a 3.5% interest rate, the city could rationally support a $12M bond. However, the city plans to issue a bond of no more than $8.4M, the more conservative option.

Calculating Debt Capacity and Recommendations

Recommended Bond Terms

Borrow $8.4M

Assume a 5% interest rate

Establish loan-period for 30 years.

Dedicate $546K in tax revenue for debt service.

All $113K stormwater funds to offset part of the debt service.

Redirect $723K to service the debt that up until 2019 has been used to pay for the property purchased by the city, finance other capital projects, and fund the Downtown Development Authority (DDA).  

As a side note: the BAN funds will not be used for street repairs and maintenance.

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The current and projected tax revenue will pay the debt service. 


Tax revenue from new development (that is underway but hasn’t been delivered) will be added to the $723K already available. Taxes from development that has yet to be approved is not included in future estimated taxes.  

Note that within ten years, new tax revenues from the South City Partners (SCP) and Trammel Crow Residential (TCR) projects in the western Central Business District will be enough new revenue to cover the entire debt service.

Borrow Versus Save and Pay


The City would have to save about $750,000 each year for 30 years before it could build a project and the cost of that project would be $22M versus $11.4M. 

Some people have suggested that the city should save money to pay for improvements rather than borrow money.  On the surface that seems to make sense but when one looks more closely at the increases in construction cost, this "pay as you go" approach doesn’t make financial sense. 

For example, assuming the loan was $5.8M (even in an unfavorable loan environment) with a 5% interest rate over 30 years would cost $380K annually in principal plus interest. This would make the total worst-case cost $11.4M and you get the project now.

In contrast, if you saved all the money and waited, the inflation would increase the price tag to over $22 million over 30 years and you don't get the project until you have the money.  This assumes a 4.56%, the average construction inflation per the U.S. Census Bureau.

Bond Anticipation Note (BAN)

Bond Anticipation Note (BAN) The city pays interest on only the money they borrow. This reduces the risk of over-borrowing and having to pay interest on money that the City doesn’t need yet or won’t need in the future. In contrast, for a Government Obligation bond (GO Bond), the City borrows a lump sum at the beginning of the project and pays on both the principal and the interest on that amount whether they needed the money now or later – or not at all. If you know the exact cost and the timing of the project, the GO bond is a very good tool. For projects that will be implemented over time and the cost are shifting, the BAN is a more cost-effective tool. 

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