Bond financing saves $126,000
The city of Princeton plans to refinance four bonds on March 22 as one package to save an estimated $126,926. Three are general obligation improvement bonds and the fourth is a general obligation sewer revenue bond.
The four bonds in their original amounts totaled $3,790,000 and the remaining unpaid principal after their call date, is $2,130,000.
Financial consultant George Eilertson, with Northland Securities, explained to the city council last Thursday how the four bonds will be rolled together to refinance as one bond totaling $2.27 million. The refinancing will take advantage of greatly-reduced interest rates.
Three of the bonds (principals remaining of $60,000, $135,000 and $670,000) are improvement bonds used for projects like street and utility construction. They were issued in 2000, 2004 and 2005 respectively, and their original amounts were $535,000, $400,000 and $1,100,000, with original interest rates respectively of 5.25 percent, 3.77 percent and 4.06 percent. Eilertson calculated that the average new interest rate for these bonds would be .35 percent, .51 percent and 1.23 percent respectively.
The fourth bond, a sewer revenue bond issued in 2007, was originally $1,755,000 and has a remaining principal of $1,265,000, with an interest rate of 4.29 percent. Eilertson has calculated it could have a rate of 2.04 percent.
Eilertson told the council that not every city is able to roll multiple bonds into one refinancing, explaining that a city with a population of 500 likely couldn’t. But a “sophisticate city like Princeton” (population 4,698) can, he said. Also, bond rating agencies look favorably upon cities that manage their debt, he said.