SPRINGDALE -- The City Council on Tuesday night saved almost $1 million a year for its residents.
The City Council voted 7-0 to refinance $50,730,000 of the 2012 bond it still owes. Council member Amelia Williams didn't attend the meeting.
Council member resigns
City Council member Colby Fulfer on Tuesday night announced his resignation effective Feb. 29. Fulfer said he and his family will move to a new home out of Ward 1, which covers the northwest quadrant of the city.
Law requires members to live in the ward they represent, said Ernest Cate, the city attorney. He said the council can appoint a member by a majority vote.
Fulfer would have faced reelection in November. Any person the council might appoint would still face an election to keep the seat. Law also allows the council to not appoint a new member because the time left on the seat is less than a year, Cate said.
— NWA Democrat-Gazette
The city will repay the refinanced bonds at a 2.24% interest rate. Repaying at the lower interest rate will save the city $950,000 a year over the next five years, said Bob Wright of Crews and Associates.
The savings can go into city coffers once the transaction closes March 31, Wright said. "Anything that improves your annual payments go back into your budget."
Wright said $950,000 savings is net, after all fees are paid.
"That's almost $1 million a year," Mayor Doug Sprouse said. "That's true savings. We're not taking on additional debt. We're not extending debt."
The 2020 bonds are set to mature in 2032, as were those bonds issued in 2012.
The 2012 bonds originated in 2006, when voters approved $133.1 million to build Arvest Ballpark, three east-west traffic corridors and more, said Wyman Morgan, the city's director of finance and administration.
These bonds were refinanced in 2012 for $135.4 million. The city was paying 3.76% interest, said Kevin Faught of Stephens Inc.
The economy had a downturn at the time. City revenue didn't meet projections when the city sales tax used to repay the bonds "bottomed out," Morgan said.
The city charges a 2-cent sales tax for every dollar spent in the city. One penny of the tax makes the payment on the 2012 bonds and also pays for the city's general and capital improvement funds, Morgan said. The other 1 cent of tax pays 2018 bond debt.
Faught said the transaction would be similar to a homeowner refinancing the mortgage on his house when interest rates drop. "They are going to take advantage of a lower rate, but not extend the term of the mortgage," he said.
"You were able to take advantage of the down market because of uncertainty over the coronavirus and its effects it had on the market," Wright told the council.
The city considered refinancing the bonds when the interest rate dipped in October, Wright said. But the dip spiked upward before the counselors had a chance to investigate. "The opportunity was gone the next week," he said.
"It's an aberration you were able to take advantage of. It really was a great day to be involved in the market," he said.
NW News on 02/26/2020
This story was published at 1:00 a.m.