KEEGO HARBOR — Refinancing a 2004 bond to take advantage of favorable interest rates could save Keego Harbor money, officials and advisers said at a Jan. 17 City Council meeting.
The City Council voted 5-0 to undergo legal procedures to refinance a 2004 capital improvement bond from Keego Harbor’s Tax Increment Finance Authority this year. The move could save the city money, according to Mayor Sid Rubin.
“The savings will be a minimum of $10,000 to $40,000 (maximum) per year over the term of the bonds, depending on which sale option we select,” he said after the meeting.
While the TIFA bond is supposed to last until 2022, bond attorney Mike McGee told the council that refinancing is a very common event in the current marketplace.
“Municipal bond rates across the country and certainly in Michigan are at lower levels than we have seen in quite some time,” he said.
McGee said the bonds are callable in April and the optimal time to refinance will be approaching by March.
According to Rubin, the bonds are issued by a Keego Harbor TIFA board that presides over a TIFA district in the northern part of the city and part of Orchard Lake Road. The TIFA board has the power to issue municipal bonds in order to fund local public projects and developments.
Rubin told the Beacon that the original bond money went toward developing the roads and lighting Cass Lake Road. Right now, the TIFA fund pays the current debt, but the city’s general fund is the ultimate guarantor of that debt, Rubin said.
Although the council moved forward on the plan, the refinancing is not a done deal. The council expects to see more financial information at a future special meeting before it votes to approve the refinancing. It also needs to decide whether it wants to refinance for 10 years or as many as 15.
According to city officials, the average interest rate of the bonds over a 10-year period is expected to be around 2.7 percent, but that could rise to about 3.2 percent over 15 years.
Rubin said pursuing a longer bond period could pare down quarterly payments. “What the extension does is reduce the (bond) payments to a more manageable amount,” Rubin said. “That could be and will be self-funding from the current taxes we receive from that district.”
Learn more about Keego Harbor at www.keegoharbor.org or by calling (248) 682-1930.