Falmouth finds savings in favorable interest rates
FALMOUTH — The town will realize several hundred thousand dollars in savings over the next 10 years from the recent refunding of the existing town share of the 1999 high school construction bond.
The new rate of 2.03 percent, down nearly 3 percent from the original rate of 5.1 percent, on the $2 million remaining in the $4 million borrowed 10 years ago will yield $25,000 savings in the current fiscal year, $80,000 in fiscal 2011 and $360,000 over the total 10 years remaining, according to Finance Director John McNaughton.
In addition, 14-month construction financing of $28 million for the new elementary school came in at a rate of 0.6005 percent, locking in that portion of the construction financing until permanent financing is obtained in 2011. The $28 million total represents a refunding of an eight-month, $8 million bond anticipation note issued in April at a rate of 0.584 percent, combined with an additional $20 million in funding that will carry the project through the bulk of the construction phase.
"We're taking advantage of short-term, low rates to do the financing," McNaughton said. "It was critical to lock in on bond anticipation notes where we could. This guarantees construction money borrowed virtually for nothing."
The state share, about $40.6 million of the $46 million elementary school project, will be borrowed in January 2011, and the local share, about $5.4 million, will be bonded in August 2010, he said.
Next year, the town will likely refund the $8 million remainder of the high school bonds from the original $16 million of the state share issued in 2000, to get a more favorable rate, McNaughton said. In order to avoid penalties that would offset any benefit of a lower rate, the town must wait for 10 years to refund a 20-year bond, McNaughton said.
"This is great for the citizens of Falmouth; this is money going back in savings to the town," he said.
He also said Moody's Investors Service and Standard & Poor's both recently reaffirmed the town's long-term bond rating at AA+.
Dan O'Shea, the School Department director of finance and operations, Tuesday said he was pleased with the favorable interest rates, which come on the heels of construction bids that have averaged between 20 percent and 25 percent lower than budgeted amounts.
"(McNaughton) does a great job; the town's in excellent financial shape and it's a good borrowing environment right now," O'Shea said.
With construction bids completed, the town will seek bids next fall on moveable equipment, including furniture, food service and technology, O'Shea said.
Peggy Roberts can be reached at 781-3661 ext. 125 or email@example.com.