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03/23/2021 04:30 PMThe town is taking advantage of current low interest rates to refinance a handful of loans, anticipating a savings of about $20,000 a year over the next 10 years and hoping to add to that.
Currently, the town can only refinance loans within a relatively narrow time window if it wants the process to be tax exempt, according to Madison’s bond counsel Bill Lindsay. The federal government is currently looking at legislation that would eliminate that window for municipal bonds and allow towns to refinance tax free at other times, according to First Selectman Peggy Lyons.
That could open the door up for significant more savings, Lyons said, with interest rates still very attractive and the town’s high credit rating reducing the up-front refinance cost.
“Investors are willing to pay a premium to buy those bonds, and that premium will go back into the transaction,” Lindsay said, “and help reduce the amount of money or debt the town needs to issue to refinance the old bonds.”
The bonds that the town was already able to refinance, issued for the Griswold Airport Property in 2010, according to Lindsay, totaled about $3.8 million. Those averaged a four percent interest rate, which has now been dropped to 0.089 percent.
“From an interest rate perspective...it’s very robust,” Lindsay said.
Though he described the $20,000 annual savings as relatively modest, there are larger bond issuances to look at if the federal government makes that legislative change, which Lindsay said could be a “game-changer” as far as operating budget savings for towns.
If that change is not made, the next window for tax-exempt refinancing isn’t until 2024, Lindsay said.
It is not impossible for the town to refinance without the tax exempt window, with Lindsay saying other towns have chosen to do that “when the economics were better.”
Lyons clarified that any refinancing is dependent on continued favorable market conditions.