After a difficult budget year dominated by a significant debt increase due to the new Guilford High School (GHS), the Town of Guilford recently announced some positive financial news: the successful sale of low interest rate long-term and short-term bonds, proceeds from which will go toward financing the new high school.

According to a press release, on Aug. 3, the town sold $15,630,000 in long–term bonds and $14,000,000 in short-term bond anticipation notes through a competitive bid process. Approximately $22.6 million of the proceeds will be used to finance the new high school and the balance of the proceeds will be used to fund various town and education improvement projects.

Fidelity Capital Markets purchased the bonds at a rate of 2.22 percent. First Selectman Joe Mazza said the low interest rate has a positive impact on residents’ taxes.

“Because of the interest rates dropping, it will be less of a hit to their [residents’] tax bill then we had originally proposed,” he said. “The high school was originally proposed at $64 million of Guilford money at four percent interest for 30 years.”

Mazza said the plan was to fund the building of the high school over four years through a series of issues beginning in 2014, all of which have had rates below four percent.

“None of that has approached that four percent that we first anticipated,” he said. “That is the positive. Now on the downside all of these bonds are 20 year bonds, but when we proposed the high school we said we would fund them over a 30-year period, so the payout would have been longer, but we would pay a little bit less each year. It is the difference between financing your car over three years versus five years.”

Mazza said this approach is better for the town in the long term.

“Over the long term we are going to save about $22 million in interest costs, however in the short term, our debt service is going to be bigger each year for a shorter period of time,” he said.

Mazza added the town was able to sell the bonds at a premium.

“We sold them at a premium of $430,810, which meant that they actually paid us to sell them,” he said. “And on the notes we also sold those at a premium of $183,680.”

The low interest rates on the bond issue can be attributed to Standard & Poor’s reaffirming the towns AAA bond rating recently according to Mazza.

“By reaffirming our AAA rating, it will assure us that we will be able to get an excellent interest rate when we go to market to fund our other capital projects as well as the final piece of the high school which we will do next August,” he said.

According to the press release, Standard & Poor’s credited the town’s strong management and budgetary performance, specifically its past seven years of continued surpluses and increasing unassigned reserves, as supporting its highest rating. The rating report mentioned development projects including Guilford Commons and The Residences at 66 High Street as providing additional diversity and growth to the tax base. The bond issue was also rated Aa2 by Moody’s Investors Service.