DECATUR — Refinancing the $7.2 million in municipal bonds for the new waste-water treatment plant could save the city in excess of $300,000 over the life of the loan, Bob Wright, of Crews and Associates, told city council members at the Sept. 13 meeting.

Wright and Michael Moyers, an attorney for Friday, Eldrige and Clark, presented the advantages of refinancing the loan during the meeting. Historically low interest rates will allow the city to refinance the project without extending the length of the loan and without adding any money, Wright said.

The original bond issue was in 2005 and will be paid off in 2035. The city will pay a total of $12.7 million in principle and interest under the current loan. The new loan amount will be for $7.415 million, and the city will pay a total of about $12.3 million in principal and interest.

Refinancing the bonds will cost about $148,000in fees, including $80,000 for legal counsel and publication, Wright told the council.

The average interest rate of the current bond issue is 5.2 percent. As of Sept. 10, the new average interest rate would be 4.54 percent, saving the city about $1,000 a month or about $300,000 over the life of the loan, Wright said. Interest rates could go up before they are locked in next month, he stressed.

The all time historical low for interest rates was about two weeks before the council meeting, according to Wright. Since that time, interest rates have been slowly rising but even so Wright thinks the savings will be substantial.

“If we don’t have to pay a rich investor that owns those bonds, great. Put it in your pocket instead of theirs,” Wright said.

If the bond sale doesn’t happen there will be no cost to the city, according to Wright.

“We only get paid if a transaction closes,” he explained.

After hearing the presentation, the council passed an ordinance to“get the ball rolling” on the bond refinance.

The ordinance will allow the financial firms to prepare and send out a prospectus to potential investors, Moyers explained.

The ordinance also states that the new bonds must meet certain parameters, such as saving a minimum amount of $200,000 to $250,000, before the deal will be finalized.

“I don’t think we’ll ever see rates like this again unless the country goes belly up completely,” Montgomery said.

“It’s wise use of the money,” said councilwoman Linda Martin.

News, Pages 2 on 09/22/2010