Fate City Council approved refinancing the Waterworks and Sewer System Revenue Refunding and Improvement Bonds at the Monday, April 20, 2020 meeting. The refinancing resulted in reducing the interest rate in half, which will save $1,427,809 over the remainder of the bond terms.
City Manager Michael Kovacs thanked Director of Finance, Raju Anthony and the whole financial team for their hard work on the refinancing of these bonds during this uncertain time. He said, “a few weeks ago there wasn’t a bond market to speak of, we prayed very hard all day, especially when the bond didn’t sell earlier in the morning.”
Over the past year, the municipal bond rates have continued to lower to an all-time low of 2.25%. Due to favorable bond market conditions, the City’s financial advisors Hilltop Securities Inc. negotiated refinancing the Waterworks and Sewer System Revenue Bonds. The original bonds were purchased in 2011 for $7,290,000 at an average interest rate of 5.05%. The refinancing of the bonds resulted in an interest rate of 2.25% on $5,600,000 with the maturity date remaining August 2037, which is the same as the original terms.
According to Nick Bulaich, Managing Director of Hilltop Securities Inc., “The A- [bond] rating again is an affirmation.” He went on to explain, key indicators in the S&P affirming the City’s excellent credit ratings include “a diverse customer base with strong income indicators, affordable rates, and good operational management practices and policies. From the financial side, very strong liquidity, very low debt position, and very good financial management practices and policies.”
Bulaich concluded that the S&P metrics indicate a higher rating is achievable but will be reassessed after the COVID-19 crisis effects have leveled off in the economy.
Submitted Press Release