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09/07/2016 08:30 AMIn the Aug. 18 sale of $5 million in general obligation bonds, the town sold the bonds at an average rate of 1.96 percent, a lower rate than the 2.25 percent a bond advisor forecast. The difference adds to the savings on annual debt payments the town will see as a result of the successful bond refunding sale.
There were two parts to the Aug. 18 sale. The first transaction was a sale of new municipal bonds to replace those issued in 2013 at a 3.27 interest rate with new bonds carrying a lower interest rate. The difference represents savings to the town.
“Of the $5 million that we sold [in 2013] for fire equipment, infrastructure projects, and school projects, there was $3,645,000 in principal outstanding. Those original bonds carried a total interest costs [TIC] of 3.27 percent. In a refunding, you sell new bonds at a lower interest rate...and retire the original bonds,” explained Finance Director Andrew Urban. “The TIC for the [new] refunding bonds is 1.78 percent, nearly half the original TIC.”
Urban said that the rate difference means the town will save $421,252 on debt payments over the bonds’ remaining term, the next 18 years; this amount includes a savings of $15,740 in interest the town would have paid in the current budget year.
The second part of the Aug. 18 sale was a transaction to sell “new money bonds of $2,840,000 to finance the purchase of the remaining three pieces of fire equipment, supplemental funds for the Lynn Road Bridge replacement, capital repairs to the Riggio Building, and various projects for the Board of Education,” wrote Urban in a memo to the Board of Finance and Board of Selectmen. “The TIC for the new money bonds is 1.96 percent. In the modeling for debt service budget forecasting, we assumed a TIC of 2.25 percent.”
So once again, the town will pay less to service these new bonds than was projected before the sale.
Most of the new bonds’ proceeds will be to fund the purchase of the three new fire pumper trucks now being equipped for deployment soon by the Westbrook Chemical Engine Company, the town’s volunteer fire department.
About $100,000 of the funds raised by the new bond issue will fund needed capital projects to update the John P. Riggio Building, the former Town Hall. Work still not completed include tasks to remove emergency management’s antennas from the building roof, reinstall them in a ground-based structure, and install a new replacement roof on the building.
About $600,000 of the total is allocated for school projects including $300,000 to install air conditioning in Westbrook Middle School, $210,000 to support two major re-paving projects (one, the repaving of the lot on the East side of the high school, and the other, the re-paving of the Daisy Ingraham Elementary School parking lot and bus circle), and $90,000 for updates to the high school auditorium.
The new bonds’ term is 20 years.