Routt County to save $65K per year by refinancing debt
March 28, 2012
Steamboat Springs — Routt County officials expect to save about $65,000 annually and $852,000 by 2025 after restructuring the outstanding debt on the Routt County Justice Center.
"We've been working on this for two weeks to get in on the interest market while rates are down," Commissioner Diane Mitsch Bush said.
The county financed the $17.5 million cost of the justice center in 2006 by issuing certificates of participation. The certificates are a financing instrument that allows governments to enter into a lease purchase agreement instead of bonding to build new capital projects. Instead of making debt payments, the county makes payment in the form of an annual appropriation.
At the time the certificates of participation were issued, the county was being compelled by the state to modernize its court facilities, but the voters already had turned down a bond issue for an expanded courthouse in downtown Steamboat Springs.
County Finance Director Dan Strnad said Wednesday that the new certificates of participation were released to prospective investors on Tuesday and are expected to close April 5.
The interest rate on the new certificates of participation will average 2.94 percent, compared to 4.35 percent on the original certificates issued in 2006. At that time, the county entered into a lease purchase agreement with the Routt County Public Building Authority to facilitate the issuance of the certificates. UMB Bank serves as the county's trustee.
Strnad said that at one point this month, county officials had hoped they would be able to save as much as $1.3 million during the life of the loan, or close to $90,000 annually, but the volatility of the financial markets and a positive trend in the stock market likely pulled away some investor attention. Routt County received an A-plus rating from Standard & Poor's, Strnad said, but pending changes in the rating of an insurance company that will indemnify the certificates of participation also influenced the best available interest rates.
"In the big picture, $850,00 is a very nice number," Strnad said. "I wish we could have done better, but it's a timing thing. We delayed issuing the certificates for a week but decided our rates are probably not going to get better."
The $852,000 figure is based on the purchasing power of today's dollar, Strnad added. If one were to factor in the rate at which the buying power of a dollar is expected to decrease during the timeline between today and 2025 when the debt will be retired, the adjusted savings would be about $674,000.
The cost of reissuing the debt was about $323,000, including bond counsel and insurance, but that amount is rolled into the new certificates of participation and factored into the estimated savings to the county, Strnad said.
To reach Tom Ross, call 970-871-4205 or email tross@SteamboatToday.com