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Refinancing county debt should save big

Favorable interest rates expected to save taxpayers more than million over next decade

 

SARAH LOWERY
Staff Writer

 
The office of County Manager George Wood announced on Tuesday that recent refinancing efforts will save the county more than $1 million over the course of 11 years.
According to the news release, Lincoln County refinanced $1.6 million of its 2002A Series General Obligation Bonds and nearly $10.48 million of its 2004 Series School General Obligation Bonds on Jan. 10, adding that “the sale of these refinancing bonds was very successful.”
The total savings to the county will ultimately be just under $1.09 million over the 11-year life of the bonds, with the net present value of those savings being more than $990,000.
Most people probably understand the benefit of refinancing their mortgage to save on interest rates. That same principle applies to government bonds. In speaking with the Times-News Tuesday, Wood used this analogy, comparing the process to someone redoing a mortgage to get a lower interest rate. The decision was simply about saving money and, thereby, keeping the tax rate lower, he said.
As for the immediate impact on the county’s budget, Wood said a decrease in debt-service payments of nearly $95,000 for fiscal year 2013 is expected. Additionally, savings in each of the following years should be roughly the same.
“It will help us balance next year’s budget,” Wood added, noting that the county will not have to spend money it originally would have had to spend.
The county has been refinancing its existing debt during the last three years as more favorable interest rates have made it financially feasible to do so. As a result, there have been “considerable savings” for taxpayers, said the release.
Wood noted that the current “artificially low” interest rates are the lowest he has seen throughout his career.
“This bond market is highly unusual,” he said.
County officials are also in the process of finalizing another refinancing possibility, one that was recommended by their financial advisors after last week’s success. Wood hopes to go to sale with it on Feb. 7 and receive similar savings.
He has written the county commissioners to notify them of the additional issuance, but no action will be required on their part as they have already previously authorized the bond refinancing. He added that it was about waiting for the right time.
The time appears to be now. Wood believes that, coupled with the county’s “good credit ratings,” the current market environment has created an excellent opportunity to jump onto.
“We are extremely pleased with the results of this bond refinancing, and I want to particularly thank Finance Director Leon Harmon and our financial advisors, First Tryon, for their excellent work on this issuance,” he concluded in the release.

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