Bond move saves city money
WARREN — Refinancing three bonds sold in 2013 to do infrastructure and building repairs, as well as to purchase the former Gibson Building, will save the city nearly $640,000.
Auditor Vince Flask announced last week the city retired a $2.1 million bond that was used for building acquisition, a $3.9 million bond used for the improvement of various city-owned properties and buildings and a $2.4 million bond for infrastructure improvements. The original bonds were financed at 3.96 percent interest. The interest rate now is 2.39 percent.
“We addressed two goals with this refinancing, first we reduced the total debt by $1,789,479 and second, we lowered the city’s debt payments by $639,479 over the next 15 years without extending the maturity,” Flask said. “We simply paid down some debt and issued new bonds at a lower rate to retire the older, higher rate bonds.”
During Flask’s discussions with city council on refinancing, Councilman Dan Sferra, d-at large, equated the move to a homeowner refinancing a mortgage at a lower rate without increasing the length of the loan.
Council giving Flask permission to sell the bonds directly, rather than publicly, allowed the auditor to get the lower interest rate.
“Without the direct placement option, it would have been harder to get such a good rate,” Flask said.
Mayor Doug Franklin said refinancing the bonds is a prudent way to save taxpayer money. Doing so lessens the amount of money the city has to repay.
“What I am now waiting on is for the auditor to take action to have our bond rating reviewed,” Franklin said. “We are in an excellent position to see our ratings increased.”
In 2016, Moody’s lowered the city’s bond rating from A1 to Baa1, a three point drop. At the time, both Franklin and Flask said they did not anticipate the lower rating would significantly affect the city’s ability to obtain short term loans.
Although the lower rating indicates the city has the ability to repay its financial obligations, it indicates there is some concern that adverse economic conditions could place it at risk.
Since the bond rating was lowered, the administration convinced voters to pass a 0.5 percent income tax increase in order to bring on new firefighters, police officers and do road improvements. Franklin, along with activist Dennis Blank, have also devised a plan to bring new investments and economic development to the city.
“We are making some positive strides,” Franklin said.