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Home / News / La Marque will save $250,000 in debt interest

La Marque will save $250,000 in debt interest

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By Lora-Marie Bernard

 

A $2.5 million refinance of City of La Marque debt will save city taxpayers an estimated $250,000, according to its investment adviser.
At a special meeting July 17, the city council adopted the first and final reading of an ordinance that issues the refunding of outstanding debt. The new debt will be issued at a lower interest rate. “This is reducing borrowing cost which translates into interest rates saving,” said Jim Gilley of USA Capital, the city’s investment adviser.
The refunding ordinance is similar to the refinancing of a home mortgage at a lower interest rate. Staff expects the refinance to save at least $250,000, according to agenda documents. The Texas Government Code requires the city council to adopt the ordinance before the process can begin.
A public hearing was conducted before the council deliberations. No one spoke for or against the ordinance, although Suzy Kou, city finance director, said she received one phone call from an investor who said he did not want the city to refinance. “He did not want us to call (the note) because it is at a higher interest rate that he is earning,” she said.
Mayor Bobby Hocking acknowledged Kou’s report and called for the council vote, which was unanimous.
The $2.5 million refunding comes from the general obligation series 2017, Gilley said. The current debt interest rate hovers at about 4 percent.
Based on the current rates, Gilley said the funds can be refinanced at about 2 percent and thereby save the city a quarter of a million dollars in interest. That translates into about a $20,000 savings per year based on today’s interest rates. “These would be sold at a competitive rate in the marketplace with a tentative timetable to receive bids on August 22 after we’ve updated the city’s rating,” he said. “We should have the money in the bank sometime before the close of the fiscal year which would be around the time of September.”
Keith Bell said the council had been concerned that the refunding could cause the obligation to remain full term.
Gilley said the concern was unfounded and the debt repayment plan would not be lengthened.
“The average life of the debt would not change,” he said. “We would anticipate based on the tentative numbers that not only would your par (or face) power increase but the life of the bonds being refunded is 6.9 years and the average life of the proposed structure, which may very just a little bit, would be 6.8 years.”

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