Town Looks To Drop Debt By Over $1.5 Million

Published 6:14 pm Thursday, March 29, 2012

FARMVILLE – The Town of Farmville may save more than $1.5 million by refinancing a series of bonds, according to Davenport's Ted Cole, who briefed Town Council during a public hearing on the proposal this month.

The bond deal would also provide funding for the construction of a new water tank on Andrews Drive, and water lines. The public hearing was the first step in the process.

“We have savings in excess of $1.5 million over the remaining life of the bonds, somewhere on the average of about $115,000,” Cole told council members during their March meeting.

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The Town may refinance up to six different pieces of debt.

“We are looking at all of those,” Cole said.

The estimated maximum principal amount of the bonds is $22.5 million, of which $4.5 million would be used to finance the water tank project, the remaining $18 million used to refund the prior bonds.

“Presently, rates continue to be very favorable. So we're just watching rates, working with Town staff, monitoring the refinancings, and making sure that as we get closer to that May date that we're capturing all the possible savings.”

Currently, the aggregate interest rate for all of the bond refinancings and the water tank project is 2.8 percent.

“Wow!” exclaimed council member David E. Whitus, when Cole answered his interest rate question.

Cole widened the smiles on the Town's face by noting “those are all fixed rates. They're all tax-exempt rates. So we're not looking at any variable rate debt, anything like that.

“We're just in a very favorable environment. The true interest cost that I quoted you, that 2.8 percent, is kind of the blended average,” he said.

The bonds would be issued by the Virginia Resources Authority, which issues bonds twice a year. The next bond sale by the VRA is expected to be in mid to late-May, with closing in June.

The VRA has plenty of experience working with local government bond packages.

They issue bonds, Cole said, “on behalf of local borrowers: cities, counties, towns and authorities throughout Virginia.”

The Town is not obligated to refinance all of its outstanding debt, however.

“We have the ability to pick and choose, based on economics,” Cole said, adding that none of the debt would be extended beyond its current payback schedule.

“We're keeping those payment dates just like they are,” Cole told Town Council. “…So if one of those bonds matures in 10 years, if we refinance it it will still mature in 10 years.”

As the transaction date approaches and as interest rates move up and down, Cole noted, “we'll make sure…to pick and choose the right bonds, to maximize the savings.”

The refinancing journey will continue during one of Town Council's April meetings, when Cole will return with the Town's bond counsel, McGuireWoods, and there will be specific resolutions for the Town to consider and related documents.