From Staff Reports
CUMBERLAND — County officials hope to save a great deal of money by refinancing the county’s debt. Allegany County commissioners introduced two code home rule bills to do just that last week.
The bills were introduced at the Nov. 29 commission business meeting.
Two portions of debt will be refinanced, said Jason Bennett, the county’s finance director.
The first involves FEMA and other loans, which should result in savings of about $120,000. A much larger general obligation debt will result in “huge savings,” Bennett said, at about $1.2 million.
The interest rates on the larger debts run between 3 and 5.75 percent. Bennett’s hope is to get the refinancing at about 2 percent.
“We’re not going to extend the terms ... this does not stretch it out,” Bennett said.
County officials will have to meet with rating agencies based in New York. The two major agencies are Moody’s and Standard & Poor’s.
The exact amount of the savings is dependent upon interest rates when the bonds are actually put on sale, Bennett said. “We are anticipating going to sale in March — but this is still tentative.”
A late-October work session included a presentation by Bennett and the county’s bond counsel, outlining some of the potential savings and the process for putting the bonds on the market.
“The opportunity to refinance is a substantial one,” said Sam Ketterman, senior vice president at Davenport and Co., at the October meeting.
While the financial issues are complex, the idea is simple: the county will issue new bonds at lower interest rates than the higher-rate bonds previously issued.
The county pays less interest on the debt, creating savings and taking a bit of pressure off the county budget.
The move could save $385,000 in 2013 alone.
Of course, interest rates fluctuate, so the window of opportunity may be small.
The present value savings equal 10.5 percent, and “that’s a huge number,” Ketterman said, with many clients going forward at a 2 percent present value savings.
Present value savings is a required calculation for this type of transaction, Ketterman said.
The county has not gone to the public bond market since the early 2000s, Ketterman has said.
County officials will need to make a credit presentation to the major bond rating companies.
“Sales are now done by the Internet. The results are better than the old era,” Ketterman has said.