By Michael Salerno
For Hometown News
SOUTH DAYTONA -- Like the average homeowner, city leaders must stay within their budget to afford basic necessities.
And like some homeowners, they've been able to trim numbers from their budget by taking out new bank loans that refinance their debt.
The City Council approved a resolution at its March meeting that authorizes refinancing two utility bonds with BBVA Compass Bank, which would collectively save the city about $125,000 over the next several years.
City Manager Joseph Yarbrough explained the first loan, on a $1.2 million stormwater utility bond first issued in 2003, will be refinanced at a 1.38 percent interest rate instead of the existing 3.88 percent rate, resulting in a net savings of about $33,000. The bond still has the same maturity date (the date where the loan must be paid down) of July 1, 2015.
The second loan, on a $1 million bond funding a 2005 utility system infrastructure purchase from Daytona Beach, reduces the interest rate from 4.0 percent to 2.49 percent and changes the maturity date from February 2029 to February 2027. Mr. Yarbrough said the savings on refinancing this loan is about $90,000.
"It makes sense," he said. "You're saving money with the refinancing and with one loan you're reducing the maturity date."
Mr. Yarbrough added no additional money would be borrowed on each of the loans.
Finance director Christopher Campbell said refinancing the bonds is just the latest initiative city leaders have taken to reduce spending as a way to counterbalance reductions in operating revenue since the recent economic downturn. In that time, the city has seen cuts to personnel and employee benefits, while also not giving employees raises and delaying capital improvement projects such as street resurfacing.
The opportunity to refinance the loans came recently as a result of lower interest rates, he said.
"Until the past few months, the opportunity to refinance debt had not presented itself as current interest rates, although low, have not been low enough to yield a net effective interest rate reduction to justify debt refinancing as the city's borrowing has a low weighted average interest rate," Mr. Campbell said.
Council members agreed refinancing was a good idea.
Vice Mayor Nancy Long thanked Mr. Campbell for his work on soliciting proposals for refinancing the city's utility system debt, a process that involved sending a formal request to 28 banks. She said the savings achieved would have a positive impact on the city.
"A $125,000 savings is something we could certainly use," Ms. Long said.
In other business, city leaders provided an update on franchise renewal negotiations with Florida Power & Light, which resumed after the public voted down the formation of a city-run electric utility in November 2012.
City Attorney Scott Simpson said after several meetings between the city and FPL, city leaders are "getting close to the final proposal." Once FPL offers a proposal, it will be brought to the City Council for consideration.