The City Council approved moving forward with refinancing the city’s outstanding debt, which could save approximately $2.5 million and reduce the debt term by four years.
At a special meeting Tuesday, Zions Public Finance Managing Director Andrew Artusa presented two scenarios for refinancing the city’s outstanding debt for the raw waterline. The principle is $24.9 million, with scheduled interest payments totaling $8.7 million through September 2035. Everything is scheduled to be paid off June 2036.
Artusa said the city could save $1.7 million if it refinanced and kept the original length of the loan. If it refinanced and cut the term limit by four years, it could save $2.5 million and be finished with payments in 2032.
“We like this option, but both options result in savings,” he said. “So we’re good with either one.”
City staff also recommended the $2.5 million option.
“In our opinion, you want to take the most savings you can get,” Finance Director Diane Pelletier said.
Councilwoman Tracy Folda asked what the difference was in the amount of money the city would have to pay annually for the different scenarios.
Artusa said he estimated it to be approximately $90,000 more each year with the shorter term and $100,000 less each year with the longer one. He said neither scenario took into account extra money paid to the principle or future changes in the interest rate.
Councilman James Howard Adams asked whether there would be any reason not to refinance the loan.
“No. … This is an excellent opportunity,” Artusa said. “Currently, rates are really low. … The savings look really good.”
He said the city is paying 4.29 percent in interest on the loan, and he estimates the rates to be around 2 percent to 2.5 percent if refinanced.
“If we are to go through with this, what is your role as fiduciary?” Mayor Kiernan McManus said.
“To hold the city’s hand through the process … and make sure you get the best rate,” Artusa answered.
In that role, Zions’ bank division is not allowed to bid on any of the bonds.
Councilwoman Claudia Bridges made a motion for staff to move forward with the shorter option, and the council unanimously approved it.
Zions Public Finance will now write, research and create a refinancing and bond sale agreement which will come back before Council in the coming months.
Artusa said he estimated this bond sale could be close by Dec. 1.
Zions Public Finance is a registered municipal advisory firm that provides services exclusively to Nevada issuers. It also has a banking division, of which Nevada State Bank is a part.
Contact reporter Celia Shortt Goodyear at email@example.com or at 702-586-9401. Follow her on Twitter @csgoodyear.