Refinancing would save city moneyPublished 7:01pm Saturday, February 16, 2013
The city is seeking approval to refinance a loan, a move that would allow the city to save money and pay off the loan 11 years sooner than originally expected.
City Manager Josh Kay said the city would save $1.3 million over the life of the loan by refinancing it.
During its meeting Monday, the City Council approved the filing of an application to refinance the U.S. Department of Agriculture loan used to help build fire station No. 2. The approval, if granted, would come from the state’s Local Government Commission, which oversees the finances of counties, cities, towns and villages in North Carolina.
The resolution concerning this matter — adopted by the council Monday — contains these two findings of fact:
• the proposed contract is necessary and expedient because the USDA loans can be
refinanced at a lower interest rate with the same annual payments and result in the debt
being repaid 11 years earlier.
• the proposed contract is preferable to a bond issue for the same purpose because the
issuance cost and interest rate is higher for general obligation bonds and the issuance of an
installment purchase contract can be done in a more expedient manner.
Matt Rauschenbach, the city’s chief financial officer, informed the council that BB&T is willing to refinance the loan at a 2.58 percent interest rate.
USDA lent the city $2.867 million to build the second fire station.
The city welcomes the opportunity to save money on this project.
In early 2006, the city was approved to receive a $1.53 million loan from the U.S. Department of Agriculture’s Rural Development branch to pay for the second station. That commitment was made before soil-related problems with the original site for the station surfaced. Those problems forced the city to abandon the site donated for the second station and seek land elsewhere on which to build the second station. The city bought land along 15th Street Extension for the second station.
With the soil problems delaying the project for several months, construction-material costs — steel and concrete in particular —increased.
As a result, the council decided to seek a subsequent loan of $1.337 million from USDA’s Rural Development branch to cover increased costs associated with the second station.