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City dodges credit crisis for now

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What a difference a month can make. On Sept. 9, the city of Lawrence successfully sold bonds and temporary notes totaling $22.5 million to fund a variety of street and other infrastructure projects. If city leaders were to try to do that on Oct. 9 - today - it is very likely they would've had no luck. Financial investors simply would have been unwilling to loan the city the money. That's how the [credit crisis is playing out][1] for cities, counties and other local governments all across the country. Many cities have projects they've already started, and now realize they can't get the financing they need to pay for the work. "We were very fortunate with our timing," said Ed Mullins, the city's director of finance. "If we would have delayed that sale for three or four weeks, we probably would not have been able to sell (the bonds)." If that would have happened, it would have left the city wondering how to pay for projects such as the rebuilding of 19th and Louisiana streets. Other projects that are paid for by developers - but that use public financing through special assessments - also would have been up in the air. That includes projects like extending George Williams Way to connect to a new commercial district at Sixth Street and the South Lawrence Trafficway. The full list of projects funded can be found [here.][2]Mullins said the city's backup plan was unclear. He said likely the city would have begun negotiating with banks to arrange for a traditional bank loan, as opposed to selling bonds to financial investors. But he said that likely wouldn't have worked either. Banks have become reluctant to loan large sums of money recently."Banks really aren't willing to loan each other money right now, let alone to other businesses," Mullins said. But the big question really isn't what could have happened. It still remains what can happen in the future. The city has about $10.6 million in temporary notes that it will need to convert into general obligation bonds by Oct. 1, 2009. (Think of a temporary note as a short-term construction loan that the city uses to pay bills at the beginning of a project. A bond is more like the mortgage you pay for years and years.) So, in other words, the city next fall will have to convince financial investors to buy long-term bonds from the city. Everyone hopes the credit crisis will be over by then. But no one knows with any certainty when this roller coaster ride will end. If you do know, please do us all a favor: Quit reading this blog, and go directly to Wall Street. [1]: http://dealbook.blogs.nytimes.com/2008/10/01/under-strain-cities-are-cutting-back/ [2]: http://www.lawrenceks.org/web_based_agendas/2008/09-09-08/09-09-08h/gob_exhibit_a_project_list.html

Comments

Fred Whitehead Jr. 6 years, 10 months ago

Does this mean that the new roundabouts at 6th and Massachusetts, 6th and Iowa, 15th and Iowa, 23ed and Iowa and North 2nd street and North street can go ahead?? Yippiee, these things are so great and useful that we really need to get these locations fixed up so the city can start classes for the 50,000 citizens that will be needing education about these gas saving, traffic "calming" and highly desirable public nuisances. Don't scoff, this is the underlying plan, the city manager and his minions will have the whole city on whilygig sorosis, what a grand landscape!!

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