A construction loan for part of the $21.5 million Seward Wellness Center will be financed through two local banks.
The Seward City Council opted for bank financing over municipal bonds for at least part of the project at its Nov. 21 meeting.
Wellness Center Executive Director Joel Brase presented both options to the council along with models of how much the city would spend in interest long-term with each option.
The facility is being paid for through grants, private donations and a half-cent sales tax that began Jan. 1.
Brase said all grants and donations will be expended first, then the sales tax will be used to pay off the long-term financing.
He said with municipal bonds, the city would borrow the money for construction upfront, meaning interest would accumulate from Day 1.
By financing through local institutions Cattle Bank and Trust and Jones Bank, the city will not have to start borrowing money until May of 2024 based on the cash already on-hand for the project.
Because of differences in interest rates and when the short-term construction loan would roll into long-term financing, the bank model would mean financing $4.67 million over the long term, while the bond model would be $6.26 million long-term.
The bonds come with a lower interest rate but would accumulate more interest over time, making them the less-desirable option, Brase said.
Additionally, the bank loans have a lower cost of issuance and would terminate sooner.
A bond would start in 2025 and not be paid off until January of 2035, while the bank’s long-term loan wouldn’t start until 2026 and would be paid off by June of 2033, lessening the amount of time the half-cent sales tax would be in effect.
City Administrator Greg Butcher said Seward Changing the Game is still fundraising for the wellness center, and any additional gifts received over the next couple years could be incorporated into the bank financing model to further lessen the tax burden.
With a bond, future gifts wouldn’t make as much of a difference, as the money would be borrowed from the beginning and interest would still accrue.
The city plans to work with the banks for the construction loan then re-evaluate in 2026 to see which option is best for long-term financing at that time.
The matter was approved 6-0, with council members Matt Stryson and Karl Miller absent.
