St. John saving $250,000 on refinanced bonds
Published 12:00 am Wednesday, October 18, 2006
By CALEB FREY
LAPLACE – It wasn’t something St. John Parish Bond Attorney Hugh Martin had anticipated would happen again so soon, but a recent decline in interest rates has him trying to save the parish nearly $250,000 for simply refinancing an outstanding bond issue.
The item to refinance $3.4 million in water revenue bonds was brought before the Council’s Finance Committee at their regular meeting Tuesday.
The original bonds were issued in 1999 with a 20-year term for the purpose of improvements to the water system, Martin said, and are outstanding with an interest rate fluctuating from 4.9 to 5.75 percent.
“We estimate that a new bond issue could be marketed with an interest rate of nearly 4 percent,” Martin said. “It would be $249,000 in savings to the parish after all the expenses are paid. That’s money that could be available for your water system or whatever.”
The parish has already paid for nearly seven years on the 20-year term outstanding on the revenue bonds. If refinanced, the parish would still only owe for the remaining 13 years, and there would be no extension to the current debt, Martin said.
Councilman Sean Roussel was in support of the new bond issue, but made certain that pursuing it would not cause the parish to forego their current bond issue and interest rates if all does not work out with Martin’s findings.
Martin assured Roussel that the council’s actions Tuesday to approve a new bond issue in no way committed the parish’s money until everything was finalized.
“This is based on estimates of what interest rates are now,” Martin said. “This is only the start of the process.”
Martin said the process would include applying to the state bond commission for the authority to issue the bonds. The parish would then need to secure bond insurance, prepare an efficient statement and get a rating on the bonds. If successful, the parish can then market the bonds beginning in December. There are stipulations, however, the new bond issue must meet, according to Martin.
“By law we must achieve a 5 percent savings to be able to comply with the state bond commission requirement,” Martin said. “That is, we must reduce the payments by 5 percent of the principle amount of the bonds being refunded.”
Martin is hopeful the new bond issue will result in the projected savings and perhaps even more, but noted that the bonds are still subject to fluctuation in interest rates, but the opportunity to save money now is ripe.
Councilman At Large Steve Lee said although this was the first time Martin had an opportunity to bring such an issue before the current Parish Council, it’s certainly not uncommon and always welcome if it involves saving the parish’s money.
“Obviously it’s a net savings to the parish,” Lee said. “It’s just good business.”