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City looks to save money with bond refinance

By: Kristyne E. Demske | St. Clair Shores Sentinel | Published November 24, 2015


ST. CLAIR SHORES — City Council voted to move forward with a plan to refinance bonds that, if successful, could save the city hundreds of thousands of dollars in interest payments.

“The city has an opportunity, through this refinancing, to save approximately $18,000-$20,000 per year over the next 10 years,” said Finance Director Doug Haag. The city stands to save a net total of about $185,000 over the payback span of the bonds, he added.

By refinancing the bonds, he told City Council Nov. 16, the city will pay a lower interest rate.

“This is very similar to refinancing a home mortgage,” he said.

The bonds were first issued in 2006 and are paid from the utility fund. The city would sell the new bonds the first week of December and would recall the old bonds when they are callable in May 2016.

“Time is of the essence. We want to try to capture this market right now,” said Michael Gormely, senior vice president for Hutchinson, Shockey, Erley and Co., the city’s placement agent. “There’s a big demand for direct purchases.”

The city will offer the bonds directly to about 20 competitive banks and financial institutions, as well as to those qualified on the Michigan Inter-governmental Trade Network (MITN), saving the costs associated with a public offering.

“It is offered to anybody that wants to bid on them that is a qualified financial institution,” Smith said, adding that the city will save $40,000 by offering the bonds in this manner. 

Pat McGow, the city’s bond counsel, said the sale will only go through if the city realizes the savings it is looking for in lower interest rates. He initially suggested having the sale go through if the city saves at least 5 percent, but Councilman Peter Rubino made a motion to increase the savings necessary to 5.79 percent.

City Council approved the conditional bond sale by a vote of 5-0, with Councilmen Peter Accica and Ronald Frederick absent.