You’re not the only one who can save money on outstanding debt by refinancing at a lower rate. So can the City of Navasota. That’s what an analyst for U.S. Capital Advisors recently told City Council.
Jim Gilley, Jr. reported his company has been monitoring the situation for probably about a year and a half now, and now it’s looking like savings could be in the 10% range, so they believe this is an optimal time to take advantage of this opportunity.
He then detailed where we are, and what’s possible in today’s economy. In the current market, he said, the City could realize that savings from refinancing the currently outstanding certificates of obligation it has from 2005 and 2009.
Gilley approximated the average interest rate of those certificates at 4.3 percent, explaining the current 2 1/2 to 3 percent interest rate would generate those savings.
He then laid out two scenarios for Council; one that would keep the debt for the same length of time, paying out less every year, and another that would shorten the life of the debt by continuing to pay what we are currently.
In the first scenario, Gilley said, they estimate the annual cash-flow to the City would be around $53,000. In the second scenario that would shorten the debt as much as possible, so the City’s payment would approximate what it is currently, and the cash-flow savings would be close to $1.3 million.
Council unanimously chose that second option, as they passed the first reading of an ordinance authorizing the sale of General Obligation Refunding Bonds.