Would you give up a day off to save $162,000? Apparently so would members of the Hannibal City Council, who will meet in special session at 5:30 p.m. this afternoon (Tuesday, July 30) in council chambers at City Hall.
The lone issue up for consideration is the refinancing of 2008 bonds. If the resolution and bill before the Council are approved, as is expected, the city would see a savings of roughly $162,200, according to City Manager Jeff LaGarce. An added bonus is the bonds would be retired a year earlier.
This is not the city’s first attempt at refinancing the 2008 bonds. In January of this year a similar proposal was made. If acted upon the city would have saved $250,000 over the remaining life of the bonds and it would have shortened the debt schedule by two years. Unfortunately, the city was unable to move forward with the refinancing at the time.
“The project was scrapped because the city’s financial position was becoming tenuous, so much so a favorable Moody’s bond rating would have been difficult to achieve,” explained LaGarce in a memo to the Council.
Recently the city received a proposal from Stifel, Nicolaus & Co. to refinance the bonds through an “unrated private placement.” A refunding plan was developed in conjunction with the proposed refinancing concept.
According to LaGarce, Commerce Bank has agreed to refinancing the bonds, provided the closing occurs in 45 days since interest rates are increasing. The bank guarantees a 2.75 percent interest rate for each debt service year. In comparison, interest rates on the 2008 bonds currently range from 3.8 percent to 4.7 percent.
The city manager noted that three key ingredients are not being required by Commerce Bank: (1) A bond rating; (2) an official statement; (3) a bond reserve.
“Absent the requirement for bond reserve, the city’s principal amount for the new issue is actually reduced by $310,000. Thus, we would refund $2.6 million in bonds, and re-issue only $2.3 million,” wrote LaGarce in his memo.
Two items will be addressed during this afternoon’s meeting. The Council will be asked give the first of two required readings to the refinancing proposal. An agreement with Stifel, Nicolaus as the private placement agent must also be OK’d.
“This meeting may not last 15 minutes, but closing within 45 days is not possible without this brief special meeting,” wrote LaGarce.
Provided the Council approves the first reading today, the second reading would take place at the Council’s next regular meeting on Tuesday, Aug. 6.
Barring anything unforeseen, it is anticipated that the refinancing would be finalized on Tuesday, Aug. 13.