UNION — Decisions made at Tuesday evening’s city council meeting will save the City of Union a considerable amount of money.
Lawrence Flynn of Pope Zeigler Law Firm and Teresa Cawley of Southern Municipal Advisers spoke to the Union City Council regarding the city paying off and refinancing some of its General Obligation bonds.
The City of Union had combined public utility system revenue bonds outstanding, including Series 1996A (Meng Creek), Series 1996B (Tosch Creek), Series 1997, Series 2000, Series 2004, Series 2008, Series 2010 and Series 2011.
Flynn and Cawley said that upon review of the outstanding bonds, it was determined that it is economically advantageous to the city to refund and restructure the outstanding debt associated with the Series 1996A, Series 1997, Series 2000 and Series 2004.
“We’re thrilled with this deal for the city,” Cawley said. “We’ve all worked very hard together to present this package to you.”
Flynn said the plan would allow the city to maximize savings and take advantage of “historically low interest rates.” Some of the city’s outstanding bonds would be payed off with part of reserve funds being payed back to the city.
The proposed plan was referred to as Refunding Series 2012 A B C, and Cawley provided a handout to explain the plan in detail. She said the combined economic benefit of the proposed Refunding Series 2012 A B C will result in a combination of lower interest rates, which will result in total net present value savings of approximately $614,000 and shorten the final maturity of the Series 1997 bonds from 2028 to 2021. An additional benefit is that approximately $983,000 in debt service reserve funds that were cash-funded by Union will be released to the city.
After the city is refunded, the Series 1996A bonds would be paid off with a portion of the debt service reserve funds released as part of the Refunding Series 2012 A B C, and the additional debt service reserve fund included with the Series 1996A bonds. The payoff will present an additional economic benefit including interest savings of approximately $10,000 and cash flow benefit of approximately $62,350 for the years of 2013-2017.
Council unanimously voted in favor of the proposed plan.
“I think it’s great news,” said Mayor Harold Thompson. “City staff and council are very excited to be able to save the city a great deal of money by refinancing and paying off some of our bonds. This savings also represented one of our core values of being financially accountable and responsible stewards of the city’s assets and resources.”
“This authorizes us to move forward and close these bonds on Oct. 11,” Flynn added.
A detailed breakdown of the Refunding Series 2012 A B C is provided below:
Series 2004 Bonds (Series 2012 C at 1.96 percent interest vs. 4 percent)
The refunding of the Series 2004 Bonds will generate approximately $435,000 of cumulative savings. Final maturity will remain at Dec. 21, 2021. This will also result in a debt service reserve fund release in the approximate amount of $660,000, which may be used for any lawful purpose, as determined by the city.
Series 2000 Bonds (Series 2012 B at 1.96 percent interest vs. 3 percent)
The refunding of the Series 2000 Bonds will likely generate approximately $27,000 of cumulative savings. Final maturity will remain at April 1, 2021. This will also result in a debt service reserve fund release in the approximate amount of $135,000, which may be used for any lawful purpose as determined by the city.
Series 1997 Bonds (Series 2012 B at 1.96 percent interest vs. 4.75 percent)
A portion of the annual savings generated with the refunding of the Series 2004 and 2000 Bonds and the refunding of the Series 1997 bonds will be used to shorten the final maturity by seven years from June 1, 2028 to June 1, 2021. Such restructuring will generate approximately $245,000 of cumulative savings during fiscal years 2022-2028. This will also result in a debt service reserve fund release in the approximate amount of $73,000, which may be used for any lawful purpose, as determined by the city.
Series 1996B Bonds (Tosch Creek) (Series 2012 A at 1.48 percent interest vs. 2.25 percent)
The refunding of the Series 1996B Bonds will likely generate approximately $19,000 of cumulative savings. Final maturity will remain at June 1, 2017. This will also result in a debt service reserve fund release in the approximate amount of $115,000, which may be used for any lawful purpose, as determined by the city.
Series 1996A Bonds (Meng Creek) (not part of the Refunding Series 2012 A B C)
A portion (approximately $129,000) of the total debt service reserve funds that was associated with the restructuring of the Series 1997, 2000 and 2004 bonds will be utilized to pay off the outstanding Series 1996A Bonds (approximately $195,000), which were related to the Meng Facility. The remaining balance of the outstanding Series 1996A Bonds will be paid off from the Series 1996A debt service reserve fund in the approximate amount of $66,000.
An additional $10,194 in interest savings will occur by paying off the Series 1996A bonds in October versus waiting through the final maturity of Jan. 1, 2017. Annual cash flow benefit in the approximate amount of $62,350 will occur from the paying off of the Series 1996A Bonds in years 2013-2017.
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