The City of Aberdeen is refinancing about $2.8 million of its debt in a move that city officials expect will save a significant amount of money.
The City Council approved two refinancing resolutions at its meeting Monday night, one covering $2,381,300 in tax exempt debt refunding and the other covering $459,700 in taxable debt refunding.
The tax exempt issue covers refunding of parts of bond issues sold for water and sewer infrastructure improvements in 2004 and 2007, according to the refunding prospectus. The interest rate on the refunding issue is 1.84 percent, with the loan carrying a maturity date of 2026. Branch Banking & Trust Company submitted the lowest interest rate of nine bidders for the issue.
The taxable issue covers refunding of parts of the 2004 and 2007 issues and another 2005 issue. The interest rate is 2.57 percent, with the loan maturity date in 2024. Branch Banking & Trust had the lowest rate of the seven bids received.
"These are unbelievable rates," City Councilwoman Sandra Landbeck said. "We finally got such a good credit rating ... we are saving a lot of money."
Landbeck attributed the improved credit rating to city officials being "very conservative and not making a lot of tax cuts."
"It's a tremendous interest rate, tremendously low," Mayor Patrick McGrady said.
City bond counsel Stephen Winter said both loans were slated to settle today (Friday).
According to McGrady, the city had to refund some of the debt at a higher taxable rate (meaning the holders of the loan pay taxes on the interest they earn), "because we can't prove what the money was spent on" and if it was spent for what the bonds were sold in the first place.
Although the council approved the refunding bonds, McGrady cautioned they will still have to approve amendments to the city budget to reflect the money coming in from the loans before the 2015-16 fiscal year closes June 30. Those will be taken up at the June 20 council meeting, he said.