The city of Denison is poised to save just under $500,000 over the next decade from refinancing some of its bond debt.
The City Council voted unanimously this week to refund $3.98 million in debt, and reissue it at a lower rate. The decision comes as the city was offered near record-low rates amid what has proven to be a volatile market in recent weeks.
“Our Financial advisers continuously review our existing bonds to see if they are in a favorable environment to refund them and this one was flagged as one where we could find some savings,” City Manager Jud Rex said Monday.
The bonds in question date back to 2010 when the city issued $7 million in debt for water utility improvements with an interest rate of 4 percent. By the time the debt will be callable in mid-June, about $3.98 million of the original debt will remain.
Rex said the city received bids almost up to the very end before the council made a decision. Prior to the meeting, Rex said he anticipated that the rate would come in below 2 percent, and potentially less than 1.5 percent.
“We have an opportunity to refinance these bonds for a significant savings,” Finance Director Renee’ Waggoner.
When bids were ultimately opened, the city received five bids from four banks. Chase Bank offered two options, including a nine-year, fixed rate bond at 1.38 percent and a non-callable bond at 1.3 percent.
For this bond, the city ultimately voted to to accept the non-callable option with the lower rate. Rex said this is among the lowest rates he has seen in his time working in municipal government.
This broke slightly from the city’s decision in another bond approved immediately prior during Monday’s meeting. For a $2.4 million bond related to fire department improvements, the city chose a 1.46 percent bond, also from Chase Bank, over a 1.36 percent, non-callable option due to the flexibility that was offered.
With the new bond, the city is slated to save about $494,458 over the next nine years, with an average of $54,940 per year. This represents an 11.43 percent net savings on the part of the city.
While the city actively is looking for places it can save money, Rex said it is unlikely that the city will see a similar opportunity this year from refinancing other bonds.
Michael Hutchins is the local government reporter for the Herald Democrat. He can be reached at firstname.lastname@example.org.