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11/11/2020 08:00 AMThe Town of Clinton will save significant money in debt service over several fiscal years due to restructuring several bonds, according to Town Manager Karl Kilduff.
At a Sept. 2 meeting, the Town Council unanimously approved a resolution to refinance the bonds. On Oct. 21, Kilduff announced the refinancing was successful and the refinanced bonds would help the towns fiscal position in the next year and beyond.
Contacted after the meeting, Kilduff said, “The intent of the refinancing was to reduce the cost of debt service but also to take the peak off of debt in future years. As a result, the savings are pushed out to those years. In [fiscal year 20]21-’22, the savings would be nearly $103,000. In [fiscal year 20]22-’23, the savings would be over $474,000. In [fiscal year 20]23-’24, which is when debt would have been at its highest point, the savings would be over $617,000.”
To finance projects such as school construction, road repairs, and other capital projects, towns have the option of purchasing municipal bonds that are paid back over time with interest. The bonds may be paid back over several years or even more than a decade. To take advantage of a new interest rate, bonds may be refinanced after a certain period of time.
Kilduff said the town wanted to refinance bonds this year because “Market conditions create the opportunity to refinance debt at lower rates. As such, taxable and tax-exempt bond rates become the drivers that open the window to refinance. The town has a responsibility to look for opportunities to refinance different parts of its debt, especially if it delivers real savings.”
The debt payment in the most recent approved budget is $5,240,199. Kilduff said that said that no specific projects were planned for the bonds.
“In this transaction, the town was not bonding for a project. Simply put, the town was issuing new debt at a lower rate which would pay off older debt at a higher rate. That is what creates the savings in debt service. It is akin to a homeowner financing their mortgage,” said Kilduff.