St. Albans City Council plans to refinance $8.5 million in water project bonds to save more than $167,000 in interest over 20 years.
Michael Griffith of Griffith & Associates, the city's certified public accountant, reported last month that the city was expecting to receive a $147,782 refund from the IRS on $10 million in water project bonds issued in 2010 under a federal stimulus program.
At Monday's council meeting, Griffith said he recently learned that the city might not receive all of the refund because of recent cuts in the federal government's budget known as sequestration.
Griffith said the good news is that sequestration has triggered a provision that allows the city to immediately re-finance the bonds.
Mayor Dick Callaway said the existing bonds carry interest rates ranging from 6.75 to 8.5 percent but newly issued bonds are expected to carry an interest rate of about 4 percent, thus saving the city about $167,000.
Another benefit: The existing bonds are taxable but the new bonds would be free of both federal and state tax. Griffith said, "I would anticipate if you do re-issue the bonds, they'll be sold quickly in the market."
Callaway said, "We got a good deal at the time. We have a better deal at this time."
Councilman Stephen Donelson asked why the outstanding principal on the existing bonds is $8.5 million but the proposed ordinance would allow a new issue of up to $9.1 million.
Callaway said the city hopes to lay a new water line on Pennsylvania Avenue. Therefore, it may be proposed at an upcoming meeting that more money be tacked onto the bond issue.
The re-issuance passed by unanimous voice vote. To receive final approval it must come before council two more times and there must be a public hearing.