Screenshot by Ingrid Schnader.
The council discussed at the Aug. 9 meeting whether to pass a request to consider another bond refinance option.
Last year when the bond counsel began to discuss refinancing and refunding of bonds, interest rates went up significantly, and refinancing was put on hold.
At the Aug. 9 Homewood City Council meeting, Stifel Managing Director said they continued a piece of the refunding deal last September with smaller financing, and saved about $5 million.
“We intentionally did not refund all of the bonds because we felt there could be a better opportunity to do that in the future,” Dunn said. “As rates came back down again recently, it hit a level where it made sense to take another bite of the apple.”
The council discussed at the Aug. 9 meeting whether to pass a request to consider another bond refinance option.
According to Finance Director Robert Burgett, the current 5% interest rate is anticipated to drop to 2.39%, which is why the bond refunding is set at $51,491,000. However, this is subject to change based on market conditions.
Councilor John Hardin asked for further clarification from Dunn:
“Would you say this is a correct statement, that if we do this and [interest] rates go down we made a mistake, and if we do this and [interest] rates go up, we were correct?”
Dunn agreed economically speaking, but he included an analogy for clarification. If, once a stock is already sold, its value increases, it could have made more money. But because the money was sure at the time, it was still “taken off the table.”
They are not refinancing all of the bonds, just another portion of them.
“We see it as an opportunity to mitigate interest rate risk, but give yourself another opportunity in the future as well,” Dunn said.
Councilor Nick Sims expressed a different concern. In the finance committee meeting, Congress’s reconciliation bill was discussed. If it has tax exempt advance refunding on it, it could negatively affect the bond refinancing deal.
However, Dunn said it is not in any legislation being proposed at the Congressional level at this point.
“If it were to come back, there’s still 25 million dollars left of other bonds that, if it were reinstated, I would think you would probably want to go ahead and refund those bonds on the tax exempt.” he continued.
Sims said he didn’t have time to look closely at the ordinance, so another concern he had was with the costs of the ordinance and if it was the same as previous years just with newer numbers and dates.
“From my experience, this overall cost is consistent with what is generally paid in these deals,” Council President Alex Wyatt said. “If you look at deals and how they work across the state … this is within a reasonable range for what people are charged for this. I think that’s all we can ask for.”
The cost of issuance for the bond refinancing ordinance is nine tenths of one percent, or $606,210.
The bond refinance request passed 8-0-1, with Sims abstaining from the vote.
