Derry council votes to refinance municipal center bond
DERRY - The refinancing of the bond for the Derry Municipal Center could save the town as much as $123,000 over the next eight years.
The Town Council approved the refinancing of the municipal center at Tuesday night's meeting.
"Over the past year, we have looked at our bonds to see if any would benefit from refinancing them," said Frank Childs, the town's chief financial officer.
He said the bond issued in 2001 for the construction of the municipal center was ripe for refinancing. In February of 2001, the town issued $3 million in bonds to finance the building's construction with a rate range of 4.25 percent to 5 percent.
The amount outstanding on the bonds at this time is $1.2 million, according to Childs.
"The refinancing of the 2001 municipal center bonds offers the opportunity for significant savings over the remaining eight-year life of this issue," said Childs. "It is presently estimated that this bond can be refinanced at a rate of 1.73 percent ."
The bonds will be refinanced in conjunction with a $4.75 million bond issuance in late April, he added.
"Such a refinancing would produce a present value savings of $123,100, well above the $36,000 threshold (3 percent of the outstanding principal balance) recommended by the Government Finance Officers Association," said Childs.
The refinancing of the bond would reduce the annual debt service costs of the town by an average of $16,300 through fiscal year 2021, according to Childs.
Council chairman Michael Fairbanks asked if there was any downside to refinancing the bonds.
Childs answered that instead of the 1.73 percent interest rate, the rate could be slightly higher on the day of the bond sale.
"But it would still be significantly lower than it is now," he said.