WINCHESTER – The Select Board received good news when they heard about the possibility of refinancing certain bonds previously issued in April 2011. According to Peter Frazier of Hilltop Securities, the city can save almost $ 2 million over time. life of the bonds (50 years) if they choose to repay.
City Treasurer Sheila Tracy said Hilltop Securities is continually reviewing the borrowings and has identified those 2011 borrowings for repayment. Frazier, the chief executive, said this process is not new to Winchester, as the city has issued five rounds of repayment bonds in the past 10 years. He compared it to a homeowner refinancing his house.
âWe usually get a bite of the apple when it comes to repayment,â noted Frazier, adding that a bond issue usually can only be refinanced once. âSince we can’t know what the interest rates will be in the future, the industry relies on an efficiency ratio to help us decide which repayment opportunities are worth pursuing. If the ratio between savings and repaid capital is greater than three percent, the repayment transaction is considered attractive and the higher the percentage, the better the transaction.
He also stressed that the city cannot reimburse just because it wants to, because according to the general law of the mass, a reimbursement must produce savings. The net savings for this repayment will total $ 1.8 million, and Frazier advised the board to take advantage of this increase in case interest rates rise in the future.
Winchester is fortunate to have an Aaa bond rating, which allows it to borrow money from the state and pay a lower interest rate than communities without such a rating. The rating signifies the city’s fiscal responsibility and is due in part to the city’s healthy free cash reserves (which currently stand at around $ 13 million or more than 10 percent of the city’s revenue).
Frazier told the board he did not need a city assembly vote to authorize the refund. He said the savings would come in the form of a reduction in debt service payments over the life of the bond (not a check for $ 1.8 million from the government). These savings are passed on to taxpayers.
The official language of the vote reads as follows: âThat, in order to save interest charges, the treasurer is authorized to provide for the sale and issue of bonds under GL c. 44, article 21A, to reimburse all or part of the remainder of the capital, the redemption premium and the interest on the general obligations of the City dated April 28, 2011 and that for this purpose the treasurer is authorized to provide for the preparation and distribution of a Preliminary Official Declaration; provided, however, that no bonds are issued pursuant to such vote unless and until the final interest rates and other terms of the repayment obligations are approved by the board.
The obligations include projects such as Lynch School roof repairs, Muraco School HVAC and flood mitigation.
Frazier also mentioned that bonds cannot be closed without board approval. The council therefore chose Monday January 24 as the target date for this vote. As the bonds do not yet have a price, the board voted to redeem the April 2011 bonds, but not to issue them until the January 24 vote.
South reservoir dam
Tracy informed the Board of Directors that she would need them to approve an early loan for work approved by the Town Hall for the South Reservoir Dam (located on the Middlesex Fells Reserve). She said the project is scheduled to start in January, so selected councils must allow her to borrow the money in advance.
This money, $ 72,000, will be used for the feasibility study.