Marysville officials are looking to refinance a loan and they hope the move will save them more than $1 million over the next decade.
In 2011 the city issued nearly $14.6 million in bonds to pay for the new police and courts building as well as the Decker Fire Station. Those were 20-year bonds but with the option of being paid off in 10 years.
Monday night, council will hear a report about refinancing those bonds.
“We are taking advantage of today’s lower interest rates,” said Finance Director Brad Lutz.
He said the city has about $9.6 million remaining to repay on the loans. Lutz said the loans average an interest rate of about 4.15%. Lutz said that for 2020, the loan payment would be $1.06 million, paid out of the general fund, due in October.
Lutz said that by refinancing now, the city can get an interest rate near 2.5% and will not need to extend the life of the loans. He said the lower rate will cut the payments by about $103,000 each year. With the reduction, the city will move from paying a total of $11.9 million over the next decade to close out the loan to about $10.85-million.
“When these guys (the city’s bond counselors) talk to us, they give us worst case scenario,” Lutz said. “I would expect the savings to be greater than that.”
Lutz said there is a cost associated with refinancing. He said the city will need to pay a bond counselor as well as closing costs. He said he does not know those final costs yet, but said it would not be close to the savings.
While he is projecting it about 2.5%, the finance director said he doesn’t know exactly what that rate will be. He said the matter needs approved by the finance committee, which occurred this week, and council. Lutz said he anticipates the process taking several months and believes the final rate won’t be set until August.
“It is all based off the federal interest rates,” Lutz said. “We are at historic lows. We were already down there pretty low before the COVID rate.”
He also credited the city’s recent AA bond rating with allowing the city to get the lowest rates. He said investors like Marysville bonds because while the interest rate is lower, “they know it is money in the bank.”
City Manager Terry Emery said the city has been working with the same attorneys and bond counselors for years. He said that consistency and history allows them “to be comfortable talking to us and to understand Marysville, where we’ve been and where we are going.”
He said council and the bond counselors insisted the bonds be structured so they could be paid early. Emery said the city savings is, “the advantage of having theses debt issues set the way we do.”
Lutz said that even with the recent pandemic, the city is in good shape financially.
“I am always hesitant to say this, but it seems like we are coming out of this very healthy,” Lutz said.
He said year-to-date income tax receipts are down about 6%, less than the same period in the prior year. Lutz explained that was “expected with the tax due date for 2019 taxes moved to July 15.”
He said that changes makes it impossible to compare year to year.
Lutz added that earnings on investments are “on track to exceed estimated receipts for 2020.”
...For the full story, select an option below.