Refi savings doubles to $124K by Rick DeClue · News · February 15, 2013
The City of West Branch will save nearly twice the amount by issuing bonds now than two months ago, a bond advisor told the city council last week. The council approved selling $2.73 million in bonds at its Feb. 4 meeting, which carries a lower interest rate than initially reported, amounting to a savings of about $124,000 over the life of the note. The bonds are being sold to refinance a 2005 water improvement bond.
This figure is nearly double the $64,000 savings projected by the city’s bond advisor, Speer Financial, Inc., when it presented proposed figures in December.
The bonds will provide $1.4 million for the construction of a new lift station and to fix leaks in the sewer system. The remaining $1.33 million refinances the 2005 loan.
The state of Iowa allowed cities to refinance some obligations before their call date — the date when investors can demand repayment — in order to take advantage of lower rates. The original interest rate of 3.25 percent on the water bond decreased to 1.63 percent for the remaining 12 years.
Maggie Burger, vice president of Speer, provided the council with three bids for the new bond. The lowest bid from Northland Securities of Minneapolis had a blended rate for the two parts of 2.07 percent. This compared to the December projection of 2.73 percent by Speer.
The second lowest bid from Bankers’ Bank of Madison, Wisconsin was at a blended rate of 2.34 percent. Burger said this offer included participation by Community State Bank of West Branch.
The difference in rates bid meant $43,500 in additional interest in the Bankers’ Bank bid.
The third bid from Hutchinson, Shockey, et al, of Chicago came in at 2.37 percent.
Burger said the savings from refinancing allows West Branch to pay roughly $10,000 per year less in overall debt service for the next 12 years. This frees up money to pay down other obligations faster, provides funding for other needs, or could go toward lowering taxes.
Mayor Pro Tem Jim Oaks acknowledged Community State’s effort. He said their participation in the bond bid showed support for the city and its future.
Later in the meeting, the council approved a $149,000 equipment loan with Community State to finance a new street sweeper, a new skid loader and attachments.
The loan is for two years at a rate of 1.75 percent. City Administrator Matt Muckler said this bid represents a great rate, and the city appreciates being able to finance needs locally. This loan is scheduled to close Friday.