Pierceton To Refinance Bond Issue, Save Thousands In Interest
July 28, 2016 at 4:25 p.m.
PIERCETON - What do you get when you take a 10-year-old bond issue and refinance it?
A lower interest rate and a savings of between $73,000 and $116,000.
That's why the Pierceton Town Council on Monday gave the go-head to Todd Samuelson of H.J. Umbaugh & Associates of Plymouth to start the paperwork for the new bond issue.
Samuelson told council members that the outstanding 1988 bonds have an average interest rate of 8.66 percent. Similar bonds sold today would carry an interest rate of just 5.5 percent, he said.
Although the town will expend about $20,000 to complete the refinancing, it will save a great deal more on bond repayment depending on the option chosen - Samuelson offered two.
The first option would lower the annual debt service requirement from $36,900.41 to $32,609.85, keep the pay-off date at Jan. 1, 2015, and create a net savings of $72,939.50.
The second option calls for keeping the annual bond payment about the same - $36,518.57 - and paying it off three years early. This would provide the town an overall savings of $116,047.
Samuelson explained that which option is chosen depends upon the financial condition of the water utility the bond finances.
"If you can afford the current payment, then the second option would be more beneficial to the town," Samuelson said.
If, for some reason, the refinancing deal falls apart, the town would lose about $2,500. But, Samuelson said, that has never happened.
"There are hungry buyers out there," he said. "The market is good."
Town council president Ron Hall said the proposed savings would be worth the risk. Town attorney Jim Walmer concurred: "This is probably something we should have looked at last year but let it slip by."
In other business, town superintendent Brad Bailey was asked to get prices on new compressors before the council decides whether to rebuild an old one on a lift station in town.
Hall expressed concern with continuing to put Band-Aids¨ on the problem. "We've got to make sure we've got a lift station that's operable," he said.
Bailey estimates that an entire upgrade would cost the town $20,000 to $30,000.
The matter will again be discussed next month.
A resolution re-designating Arnolt Industrial Park as an economic revitalization area was signed, but cannot be adopted until next month.
Walmer said that the previous 10-year period expires this year and, since there has been a lot of progress at the site, felt it was wise for the town to renew the designation.
The resolution allows for another 10 years as an ERA for real and personal property and encourages industry either to remain or to locate here, Walmer said. He added that with a tax abatement, the town still collects taxes but it slows down the process.
The council will adopt the resolution at the next meeting, which will be at 7:30 p.m. Nov. 10 in the community building. [[In-content Ad]]
PIERCETON - What do you get when you take a 10-year-old bond issue and refinance it?
A lower interest rate and a savings of between $73,000 and $116,000.
That's why the Pierceton Town Council on Monday gave the go-head to Todd Samuelson of H.J. Umbaugh & Associates of Plymouth to start the paperwork for the new bond issue.
Samuelson told council members that the outstanding 1988 bonds have an average interest rate of 8.66 percent. Similar bonds sold today would carry an interest rate of just 5.5 percent, he said.
Although the town will expend about $20,000 to complete the refinancing, it will save a great deal more on bond repayment depending on the option chosen - Samuelson offered two.
The first option would lower the annual debt service requirement from $36,900.41 to $32,609.85, keep the pay-off date at Jan. 1, 2015, and create a net savings of $72,939.50.
The second option calls for keeping the annual bond payment about the same - $36,518.57 - and paying it off three years early. This would provide the town an overall savings of $116,047.
Samuelson explained that which option is chosen depends upon the financial condition of the water utility the bond finances.
"If you can afford the current payment, then the second option would be more beneficial to the town," Samuelson said.
If, for some reason, the refinancing deal falls apart, the town would lose about $2,500. But, Samuelson said, that has never happened.
"There are hungry buyers out there," he said. "The market is good."
Town council president Ron Hall said the proposed savings would be worth the risk. Town attorney Jim Walmer concurred: "This is probably something we should have looked at last year but let it slip by."
In other business, town superintendent Brad Bailey was asked to get prices on new compressors before the council decides whether to rebuild an old one on a lift station in town.
Hall expressed concern with continuing to put Band-Aids¨ on the problem. "We've got to make sure we've got a lift station that's operable," he said.
Bailey estimates that an entire upgrade would cost the town $20,000 to $30,000.
The matter will again be discussed next month.
A resolution re-designating Arnolt Industrial Park as an economic revitalization area was signed, but cannot be adopted until next month.
Walmer said that the previous 10-year period expires this year and, since there has been a lot of progress at the site, felt it was wise for the town to renew the designation.
The resolution allows for another 10 years as an ERA for real and personal property and encourages industry either to remain or to locate here, Walmer said. He added that with a tax abatement, the town still collects taxes but it slows down the process.
The council will adopt the resolution at the next meeting, which will be at 7:30 p.m. Nov. 10 in the community building. [[In-content Ad]]