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Geneva to save $77K on bond refunding

GENEVA – Aldermen this week approved the sale of $1.5 million in refunding bonds, a net savings of about $77,000 in interest on the life of the loan.

Refunding or calling the current bonds involves issuing new debt to cover the principal and interest owed, officials said. 

Raphaliata McKenzie of Speer Financial said it was a negotiated bond sale of outstanding debt of the city’s Series 2003 Electric Revenue Bonds Electric System Alternate Revenue Source to Robert W. Baird Company of Naperville.

The sale will extend the debt seven years but gives the city savings on the debt, officials said.

The original bond was for nearly $19 million, records show.

“The old bonds had interest rates ranging from about 4.75 percent to 5 percent, and these were replaced with 2 percent or 3 percent bonds, with a true interest rate of 2.28 percent,” McKenzie said. “It was a situation where we needed to grab the savings now, or they would eventually go away.”

Estimated fees for the refunding bond sale are $39,500, officials said. 

McKenzie said because the issue was so small, Speer Financial reduced the city’s costs as much as possible, such as not charging an $1,800 fee for printing the statement, but sending it electronically.

“We did in-house printed copies and sent those off to individuals who wanted printed copies,” McKenzie said.

City Administrator Mary McKittrick reminded officials that this bond sale was approved in June and was anticipated to be completed in August.

“That fell through because the rates were not good at that time,” McKittrick said. “It was delayed until [Monday]. I want to remind everybody we have been working on this since June to save almost $80,000.”

In June, aldermen approved $4 million in refunding bonds from 2003 and 2007 for an anticipated savings of $200,000. 

The bond refunding this week involved only the loan from 2003 because the market did not yield as good a return, officials said.

Second Ward Alderman Don Cummings said it was too bad the city lost out on additional savings, “but that is what happens when interest rates rise and the opportunity to refinance at a low level [is] gone.” 

Cummings owns Blue Haven Capital, an investment management company active in the bond market.

“Interest rates are changing constantly,” Cummings said. “You just never know.”

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