With projected savings of around a quarter of a million dollars, Rifle City Council has given the go-ahead to refinancing the 2003 sales tax street improvement bonds.
City voters approved the $4 million bond issue, which has around $1.9 million still owed by the city, Finance Director Charles Kelty told the council at a March 6 workshop.
"With interest rates so low, we think we'll have a net savings to the city of anywhere from $200,000 to $260,000, or about $45,000 a year for the next five years," he said.
The City Council was due to consider the refinancing at its March 20 meeting.
Kelty noted the city had recently paid off the bonds for the justice center and its water debt, so refinancing the street bonds "is another good way to reduce costs."
Christen Villalobos of RBC Capital Markets, the top-ranked underwriter for municipal bonds in Colorado in 2012, proposed the refinancing plan and told council the current interest rates on the bonds were between 3.75 percent to 4.1 percent.
"Right now, you're due to pay these bonds off in 2018," Villalobos said. "If you refinance at today's rates, you'll see some substantial savings."
A conservative estimate shows a possible interest rate of 2 percent on refinanced bonds, Kelty wrote in a memo for the March 20 council meeting.
Villalobos added RBC normally advertises for local investors when a city refinances its debt.
At its March 20 meeting, council considered two engagement letters, one from RBC Capital Markets to provide underwriting services, and Kutak Rock to provide bond counsel services. RBC charges a fee of $12 per $1,000 of re-financed bonds, Kelty wrote in his memo. With the refinanced amount approximately $1.9 million, this fee should not exceed $24,000, he continued.
Kutak Rock will charge a fee ranging from $30,000 to $35,000, Kelty added.
Villalobos said those figures were included in the savings estimate.
"We can't absolutely guarantee you'll see these exact savings, due to market swings," Villalobos continued. "But given the size of this issue, and five or six years is a highly desirable time for investors, we are confident."
Kelty said the city has approximately $300,000 in bond proceeds left to spend on the street projects identified at the time of the original issue.