FARMVILLE – The Town of Farmville remains on track to save well over $1 million by refinancing existing debt while funding a new water tower.
During last week's April meeting, Town Council adopted the resolution necessary to be part of the Virginia Resources Authority spring bond issue.
“The re-fundings are still producing very good savings,” Ted Cole, of Davenport, told Town Council. “We're, as of yesterday, producing savings from six different loans-away from the new money borrowing-six different refinancings, of about $1.4 million in total savings.”
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 on Andrews Drive (and associated water lines), the remaining $18 million used to refund the prior bonds.
The VRA needed approval from each of the 20 localities participating in the spring bond issue by the end of April. The bonds will go on the market on May 22 and May 23, closing on June 13.
“So we still have a ways to go until they're actually in the market. And rates are going to move up and down and more recently than not they've been moving down, which is good for the refinancing, good for the borrowing,” Cole told Town officials. “But, again, they're going to fluctuate between now and May.”
The Town, through Davenport, has established parameters with the VRA in order to ensure worthwhile savings.
“We have to achieve a certain level of savings in order to move forward,” Cole explained.
The potential savings look to exceed any low horizon parameters.
“We're well above those minimum acceptable levels for savings that we established, so everything seems to be moving along well,” Cole said. “But, again, we'll just have to watch the market between now and May.”
Of the June 13 closing, Cole told Town officials “that's when you would have your funds and you would pay off your existing obligations that are outstanding. But your rates will be locked in when they sell the bonds in May.”
The Town will be refinancing bonds that were issued in 2005, 2008, 2009, and 2010. All but one of those-one of the 2010 bond issues-are tax-exempt.
That taxable bond is the lone taxable piece of the VRA's spring bond issue and Cole assured the Town that care would be taken to assure that the approximately $1 million taxable bond continues to make sense within the VRA's package.
“If we've got a better alternative through a bank or something we'll pursue that,” Cole said, “but as of yesterday we still feel very comfortable that there's savings to be had on that loan as well as all the other tax-exempts…As we get closer to the May sale date we'll be watching, in particular, that taxable piece to make sure that's producing adequate savings.”
The VRA deal is not inflexible.
“We still we have the flexibility-if we find that interest rates are going up and one or some of the pieces of the refinancing aren't producing the savings we have targeted-we have the ability to pick and choose what actually is included in the transaction as we get closer to the sale date,” Cole pointed out.
The refinancing will be coordinated to keep the final maturity dates of the existing bonds, anywhere from 2023 to 2027.
“Those were the maturities that were established back when the bonds were originally issued and we're keeping each of them at their current final maturities. The new money piece for the utilities…that will probably have a 20-year term to it,” Cole noted.
“So we haven't extended any debt from its original maturity.”