As our community considers the upcoming bond issue, we want to ensure that voters have a clear understanding of how municipal bonds work—especially when it comes to the use of premium bonds. Premium bonds are a common financial tool used to maximize taxpayer value while keeping repayment costs in check. The City has been upfront from the start that premium bonds may be a consideration in funding sources. However, the decision whether to use par bonds or premium bonds happens after voter approval when the bonds are sold, based on market conditions and the best structure as recommended by the City’s expert consultants.

A premium bond is a municipal bond sold at a price higher than its face value, offering a higher interest rate to investors. When repaying these bonds, the city only repays the face value—not the higher price the investor originally paid. The city also only pays interest on the premium, not the extra money the investor pays. If market conditions allow, the city may be able to sell bonds at a premium. Importantly, taxpayers are not responsible for paying back the extra premium amount—just the total repayment structure that was approved. This allows the city to maximize funding for critical projects without increasing the tax burden or debt obligation.

Premium bonds are attractive to investors, which can lead to a stronger demand, lower overall borrowing costs and a faster and more successful bond sale. Even though the city offers a higher interest rate, it borrows less money overall and pays interest on a smaller amount, resulting in lower total costs over the life of the bond. Premium bonds work to the city’s advantage, ensuring that we can fund vital community projects efficiently while keeping long-term costs predictable. Transparency is key, and we’re committed to keeping voters informed every step of the way.