Screenshot taken by Ingrid Schnader
The refinance plan will provide the city with some security moving forward over the course of the year, said Council President Pro Tem Alex Wyatt at the Sept. 28 City Council meeting.
The Homewood City Council voted to refinance its 2012 bonds and a portion of its 2016 bonds to provide the city approximately $4 million, an amount which depends on the time of the sale.
That $4 million would be unrestricted and could help the city in the “uncertain times” caused by the COVID-19 pandemic, said Council President Pro Tem Alex Wyatt at the Sept. 28 City Council meeting.
“I think it would provide us with some security moving forward over the course of this year,” Wyatt said.
This plan has been in the works since early 2020, when pre-pandemic interest rates were low. Mike Dunn, the managing director at Stifel, said the pandemic “blew up” the financial world, though, and rates went up.
“Several months later, we are now at historically low interest rates,” Dunn said at the meeting. “Opportunities like this — when the market offers the opportunity and the window opens, you need to try to get through it as quickly as you can.”
As the nation approaches the presidential election, the market tends to be volatile, Dunn said.
“Nobody can predict what happens at elections, and nobody can predict — whoever wins — what that does,” he said. “But we have a known quantity right now, and that known quantity is a very attractive savings.”
As we previously reported, when the City Council approved a $110 million bond in 2016, some Homewood residents said the decision was rushed because the official process took a little more than a month. Similarly, Dunn said he and his team picked up work again on the refinancing process back in August, and this deal was approved by the council in late September.
Once again, though, the timing of a transaction like this can affect interest rates. With a presidential election looming before the 2016 bond deal, rates were “phenomenal,” said Council President Peter Wright. The timing and drop in interest rates is similar this year.
In addition, this deal isn’t as complicated as it would be if it were a new bond deal, Wyatt said. This is a refinancing of previous bond deals — it’s almost like refinancing your house and creating cash, Wright said at the meeting.
The $4 million or more made from this deal could be used not only for the city’s capital projects, but also for other uses, Dunn said. It’s a taxable bond issue and is more flexible than tax-exempt financing.
“I think we need to act on this pretty quickly, and I think this gives us a lot of flexibility with the funding,” said Councilman Walter Jones, who chairs the Finance Committee.
The council voted 11-0 to approve the item.
Also at the Sept. 28 meeting, the council voted on the FY 2021 budget. Stay tuned for an upcoming article analyzing the budget.
