FALMOUTH — With the help of some of the highest credit ratings in the state, the town announced it has refinanced its high school construction bond.

The lower interest rate – less than half of the original rate – will save an estimated $1.3 million in finance costs.

Falmouth also averaged 0.3 percent interest on the short-term financing for the elementary school construction, which, combined with other cost-saving measures, will cut an estimated $8 million from that project budget.

“Despite everything that’s going on the financial world, we’re viewed as a very good town. At the financial level, all the trains are running on time and our finances are in good order,” Falmouth Finance Director John McNaughton said.

In January, the town refinanced the high school bond that was set at a 5.22 percent interest rate in 2000. The new rate is 2.46 percent.

However, Falmouth taxpayers will not see the savings reflected in their tax rate because the interest payments for the high school bond are subsidized by the state. The $1.3 million in savings will be realized by the state, not the town.

“We did it because it’s the right thing to do,” McNaughton said.

The town was able to get the lower rate in part because of a AA-plus rating from the credit-rating company Moody’s Investors Service. Moody’s looks at three elements when determining a rating: demographics, the financial condition of the town, and interviews with managers and department heads.

The town has also financed the elementary school project with short-term anticipation notes, which carry a lower interest rate than a 20-year bond. The most recent four-month anticipation note was set at an interest rate of 0.3 percent, which makes the average rate 0.5 percent for all the anticipation notes funded by the town for the elementary school.

The town is scheduled to issue bonds for the elementary school project in May.

“By deferring the bonding and financing through short-term notes, we’re able to save on interest,” McNaughton said. “This allows the project budget to be reduced. That savings is going to the town.”

The total elementary school project was approved by voters for $46 million. But it looks like the project will come in $8 million under the approved budget.

McNaughton said that thanks to the deferred bonding, lower-than-expected construction bids, and the low interest rates, the project is now expected to cost $38 million.

“This is good news for Falmouth taxpayers,” he said.

Emily Parkhurst can be reached at 781-3661 ext. 125 or eparkhurst@theforecaster.net