After carefully gathering bids, discussing options and gaining legal approval to spend up to $350,000 from the Baker Trust, the Kewanee Park District Board moved forward at a special meeting Thursday to begin two major infrastructure projects.
The board voted to instruct its investment advisor to move the money Friday from the Baker Trust investment portfolio, whose principal is capped at $1 million.
It also accepted bids on the two projects, nearly $180,000 for Carson Electric to replace the lighting system at Northeast Park; and nearly $130,000 to Rafliff Bros. for the replacement of the Windmont Park spillway.
Clark Blair, the advisor, recommended the board take the money out immediately and place it into a low interest-bearing money market account to hedge against any market downturns between now and the start of the projects, which are expected to begin in two months.
“Park it there until the money needs to be disbursed (to contractors,” he said. “It could cost you a little bit in (potential) growth, but the downside could be so much more.”
The approximately additional $40,000 will be held for possible project cost overruns. Another project the board had considered was adding a well at the golf course, but that plan was put aside for another time.
“It’s a major step,” said Jim Powell, park board president after the board’s decision to move forward on the work. “Nobody wanted to take (the money) out, but it’s a matter of safety.”
The spillway and lighting projects are moving forward because both pose safety and district liability issues, board members have argued.
Barring a major drought, commissioners agreed that the well project could wait.
Blair recommended, and the board agreed, that he pro-rate the amount needed from the district’s seven investment funds to minimize long-term investment impact.
He said the district’s portfolio was set at a conservative 50-50 bond/stock ratio, though the project disbursal will bring it close to the $1 million principal amount.
He said that taking the money out, using a five-year return average, could reduce the district’s annual investment income by as much as $11,000.
He said an interest rate hike would actually help the district’s investments.
Commissioners also instructed Blair to prepare a risk analysis to study at an upcoming meeting to determine if the district should take a slightly riskier approach to investing in an effort to make up the lost annual revenue.
“You’l be able to see the good side and the bad side of that,” Blair said of the requested report.