County Administrator Steve Nichols said the investment group is helping the board see how refinancing at current low rates could save enough on interest payments to afford taking on new debt. New debt would cover fire trucks and patrol cars.
“We’re looking at how to take advantage of the current low-rate environment to offset debt of bonds coming due and the costs of fire trucks and police vehicles,” Nichols said after the meeting.
The sheriff cars will cost $220,000; the fire truck, $541,321.
Interest rates are so low, the county could reduce the annual payment on debt an average of $120,000, the financial advisors said.
Financial Advisor Diane Klaiss made the presentation. Her Raymond James Morgan Keegan colleague, Jim Johnson, was on hand to answer questions.
Board Chairman Shaun Kenney (Columbia) said while they are certainly talking about a lot of money, in practical terms, it’s not that different than refinancing a mortgage or credit card at a lower interest rate.
“It would be taking bonds financed at 6 percent and turning them into 3 percent bonds,” Kenney said.
“It’s just the same as taking a credit card with a 20 percent interest rate and rolling the balance onto a card with a five percent rate.”
The existing debt is not just the $68.3 million for the high school, but includes bonds issued to build the library and courthouse. Those total $4.1 million. An annual payment on that total debt of $72.4 million is $5.875 million.
Even though the Board budgeted $7.4 million for a mandated upgrade to the E911 radio system and has it on hand, Klaiss said it might make sense to borrow some or that entire amount because interest rates are so low and not likely to get much lower.
Kenney said that could be the fiscally responsible thing to do.
“Money has never been cheaper,” Kenney said. “We could take the $7 million we have set aside and finance all or some of it at say, two percent. We’d hold on to our cash and that will give us the latitude to address other needs. It gives us a lot more leeway.”
Klaiss had one slide that showed bond prices over the past 20 years. During that time, rates have been higher than the current 3.72 percent bond buyer 20 rate, 99 percent of the time.
Kenney asked the investors if there are parameters other entities look at when making the decision to refinance.
Johnson said most governments, businesses or hospitals consider saving two to three percent a deal good enough to refinance.
“Right now, on some of the bonds, you’re looking at a savings of 5.8 percent,” he said. “I’m not telling you what to do, but you asked for a guideline.”
The only decision made by the Board Wednesday evening (Sept. 5) was to tell investors to pursue some of the options.
At the Sept. 19 Board of Supervisor meeting, there will be a public hearing on what to do about a $2.7 million bond that is coming due Jan. 1, 2013. There is a chance to finance that debt through the Virginia Public School Authority pool at an estimated rate of 3.09 percent.
Supervisor Mozell Booker (Fork Union) was at the ground-breaking ceremony for the new Fork Union fire house Saturday (Sept. 8) and talked about paying off the debt.
“All I know is I figured out I’ll be 93 when the school is paid off and I plan to be around to celebrate,” Booker said.
