Refinancing of bonds saves a cool half-million dollars for Othello

In an effort to exhibit its charge of responsible governing, the City of Othello has refinanced a portion of its Limited Tax General Obligation Bonds to lower interest payments.

The bonds, issued in July of 2010, financed the Main Street Improvement Project. City officials decided to shorten the outstanding term of the financing from 19 to 15 years, and in doing so, achieved a net savings of $538,413. The net present value of 15 percent well exceeded the targeted industry benchmark of 5 percent.

“We timed the bond refinancing while interest rates are still low,” City Administrator Wade Farris said. “Similar to refinancing a home mortgage at a lower interest rate, refinancing a portion of the 2010 Bonds saves the City money by dropping the borrowing rate from 4.56 percent to 2.58 percent.”

Farris and Finance Director Spencer Williams presented the idea to city council members who offered their support for refinancing the bonds

“We are always looking for ways to save money, and we are very pleased with the interest cost savings,” said Mayor Shawn Logan.

Farris and Williams worked closely with Jim Nelson of D.A. Davidson’s Public Finance Department to structure the refinancing, compile supporting documents, answer questions from various banks, and summarize the bids from the various banks.

“The low interest rate is a positive reflection on the strength of the local economy, financial management, and the financial resources of the City,” Williams said. “Our current bond rating grade for outstanding bonds is A+.”

~ Staff report