The rebuilding of the Atlantic Highlands harbor is one of the largest public works projects in Atlantic Highlands history. On a financial scale, only the rebuild after the Nor’easter of 1992 and the building of borough hall can compare. Not only is the scale of the project enormous, but the boating season deadline adds to the challenge.
Those loyal readers of this column have been well versed in the timeline and scope of the project. Finally, the means to fund the clean up and rebuild have come into greater focus. With a price tag of in the neighborhood of twenty million dollars including the cleanup, the financing is a not insignificant factor throughout the story.
This past Wednesday, the borough of Atlantic Highlands sold Bond Anticipation Notes in the amount of $8 million as the first leg of the project. (The amount of BANS earmarked for the Harbor was $7 million with the additional $1 million BAN a rollover of sewer BANS) Due to state requirements regarding timing, the borough could not sell an additional $9.7 million BANS for the project, but the interest rate that the borough received for our notes was the best possible scenario. Unlike bonds, a Bond Anticipation Note is a one year maturity that can be rolled over for several years until a decision is made regarding permanent financing – either pay off the BANS or sell long term bonds.
Atlantic Highlands received an interest rate of 0.75% from Wells Fargo Bank. Similar issues in the market had come at higher interest rates, and by all accounts, Wells Fargo stepped up to the plate with their rate. The key issue for most investors, is how secure is the source of repayment for the notes. Due to the amazing effort of our borough and harbor professional staff, the project work sheet submitted to FEMA is close to $20 million dollars. We have received verbal assurances from FEMA officials that our project will be funded at 75%, if not 90%- and that will account for the majority of the repayment.
Additionally, the borough has a business interruption policy for the Harbor as well. In a great piece of foresight attributable to former Mayor Mike Harmon, the borough has had this policy in place since the Nor’easter of 1992. Until Sandy, the borough has never had to utilize this policy, and it will also be used to repay the Bond Anticipation Notes. It is safe to say that most municipalities do not carry this type of insurance, and Atlantic Highlands is fortunate to have funded this policy over the years.
Finally, the Mayor and Council always have the ability to raise the rates on the leases in the Harbor. While that is not currently contemplated, bond investors like to see an additional means of covering debt service, and this certainly gave investors further comfort when bidding our notes. Next month, the borough will sell our second and final leg of notes for the Harbor. If Wednesday’s sale can be replicated, the initial financing of the harbor rebuild will be considered a success.