The new public bond issue, to be handled by Merchant Capital LLC, will be set at a capped, not-to-exceed price of $9.5 million and will be repaid over a period of 20 years at a fixed interest rate of just over three percent.
“The most important thing to us is that we’re doing it over a 20-year period at a lower interest rate, so we’re saving money by doing this,” said LaFayette mayor Neal Florence.
“Basically we’re going from a four percent interest rate to something below three percent, somewhere around 2.7,” said city manager Frank Etheridge. “We would save over the term of the life of the loan about $1.4 million.”
The yearly payments on the loan, Etheridge estimates, would be reduced by about $800,000.
The decision was made in part due to upcoming federal requirements from the EPD that the city of LaFayette begin a costly phosphorus removal project in its wastewater treatment plant by May 1, 2013. This project alone would cost the city $2.25 million on its own; with the refinancing of the existing loan plus the addition of a new, smaller loan of $600,000, the cost will be covered at no great hardship to the city.
“We realize that we have some things that we need to get done and this would help with that,” said Florence.
The 600,000 loan is a short-lived opportunity that the council feels the need to take advantage of at this time, while interest rates are low.
The Dec. 10 meeting also saw the council approve a number of other financial transactions, including necessary maintenance and compliance charges to repair a pump at the wastewater treatment plant, to rebuild several electric transformers and for outside engineering companies to conduct annual industrial pre-treatment surcharge examinations and sludge management report testing of the city’s wastewater treatment facilities and water meters, respectively.