St. Clair Shores to save money through bond refunding process

By: Kristyne E. Demske | St. Clair Shores Sentinel | Published July 31, 2021

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ST. CLAIR SHORES — St. Clair Shores will save upwards of $330,000 in debt retirement costs when it issues refunding bonds to replace 2011 bonds for water line replacement and road reconstruction.

The Finance Department has been working with the city’s financial advisor, Mike Gormley of Northland Public Finance, and bond counsel Patrick McGow to review opportunities for refunding prior bond issuances to save the city money. These bonds, originally issued in 2011 for $8.5 million, were identified as a savings opportunity for the city.

“Now, the time is right. Interest rates are low,” Gormley said.

“This is, essentially, a refinancing to take debt that is outstanding at a higher interest rate and make them lower,” McGow said.

He explained that, when a bond is refinanced in the last 10 years, it’s to the city’s economic advantage to do a private placement through banks. The resolution before City Council July 19 was the only action the body will be required to take to refund the bonds.

“The banks will be bidding against each other and, I assume, (the) lowest bid in terms of interest rate is who we pick,” Councilman Chris Vitale said. “They’re bidding on us, and our good credit rating is going to help us get that lower rate.”

McGow said they would be choosing the rate that provides the city with the greatest savings. Although interest rates are low now, he said there are concerns about inflationary pressures, so it is best to “get into the market quickly and lock in those savings.”

Gormley said a request for proposals would be sent out July 27 with bids accepted Aug. 10.

“We’ll know the winning bidder that day,” he said, and the deal will close Sept. 2 and then sit in escrow from then until the bond call date of Nov. 1.

“That seems like a pretty good deal there for refinancing,” Councilman Dave Rubello said.

City Council unanimously approved the resolution authorizing the issuance of refunding bonds in an amount not to exceed $4.995 million July 19.