The City of Union is looking refinance four bonds with a combined balance of more than $9.3 million in order to get a lower interest rate on all of them, pay off one once the refinance is completed, pay off a second one at least seven years earlier than planned, and make $900,000 available for utility projects.
Union City Council voted unanimously Tuesday to approve an ordinance “amending and restating a General Bond Ordinance.”
In a background briefing to council, Finance Director Walker Gallman stated that once the ordinance is approved by council, the city will begin “negotiations regarding the redemption of its 1997 Bond, 2000 Bond, and 2004 Bond.” Gallman said Wednesday morning that the amended and restated General Bond Ordinance will enable the city to “bundle” the 1997, 2000 and 2004 bonds and possibly a 1996 bond to put them out for bids to refinance them. He said the goal will be to get a lower interest rate that would not only save the city money on interest payments, but enable it to realize additional savings by paying off the 1996 bond once the bonds have been refinanced.
The 1996 bond was issued to raise $882,772 for improvements to the Meng Creek Wastewater Treatment plant which the city has since replaced with a pump station. The city still owes a balance of $267,988.37 on the bond even though it is no longer using the facility for the purpose for which the bond was issued. Gallman said in light of this there is no point in continuing to make payments on the bond if it can be refinanced with the rest and paid off this year.
The 1997 bond was issued to raise $1,156,121 to build the water tank on the Oak Grove Road and install a generator at the water plant. The city still owes a balance of $809,398 on the bond which is scheduled to mature or be paid off in 2028. Gallman said refinancing the bond with the others will enable the city to pay if off by 2021 or 2022.
The 2000 bond was issued to raise $2,012,467 for water and sewer improvements in Buffalo and Union. The city still owes a balance of $1,054,858 on the bond.
The 2004 bond was issued to refinance bonds issued in 1993 and 1994 which were issued to refinance a 1991 bond issued to pay for a variety of improvements to the city’s utility system. The 2004 bond raised $9,480,000 and the city still owes a balance of approximately $7.2 million on it.
Gallman said the city is looking to get a lower rate on both of these bonds as well as realize the savings that would be achieved by paying off the 1996 bond this year and the 1997 bond at least seven years early.
In addition the savings the city hopes to realize, Gallman said refinancing the bonds will enable the city to transfer approximately $900,000 from a debt service fund it has been required to have on hand to ensure the bonds are paid to its retained earnings fund. He said this will make the funds available to pay off the 1996 bond with any funds left over being used for utility improvements.