City will save about $123,000 by reissuing bonds

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— Just as homeowners are taking advantage of low interest rates to refinance mortgages, the city is refunding its bonds.

City Finance Director Don Taylor said low interest rates convinced the city to reissue its $1.43 million general obligation bonds. Refunding the bonds is expected to save the city about $123,000.

The city reissued the bonds last week and is expected to close on the subscriptions by mid-July.

The old interest rates on the bonds were between 4.75 percent and 5.1 percent. When the refunding is completed, the new interest rates are expected to be between 1.2 and 2.5 percent, Taylor said.

The bonds were initially issued in 1993 and will be paid off in 2009. The city has one chance to refund the bonds, Taylor said.

The city also received word that its bond rating has been upgraded from A3 to A2, affecting $2.4 million of the city's debt. A rating upgrade indicates less risk and potential for a lower interest rate.

In a letter to the city, Moody's Investors Service Inc. said the upgrade reflects the city's sizeable and growing tax base, stable financial operations despite the drop in sales tax revenue and a moderate debt that is being rapidly paid back.

City Manager Paul Hughes said at a June 10 City Council meeting that the city's conservative and sound fiscal management contributed to the rate upgrade.

"With the state of things, it is not easy to have that reputation in this economy," Hughes said.

During that meeting, Councilman Bud Romberg asked if the city had thought about waiting to reissue the bonds until after the Federal Open Market Committee announced if it was going to cut interest rates on Wednesday.

Taylor expressed concerns with trying to predict the Fed's action and supported going forward with reissuing the bonds.

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