Bond refunding to save Hebron more than $400,000
HEBRON - Village officials got some good financial news at the July 27 council meeting.
Joseph Robertson of Ross, Sinclaire & Associates, LLC of Cincinnati detailed how the village could save more than $400,000 in interest costs by refunding bonds issued to build the municipal complex, double the capacity of the water treatment plant and upgrade the wastewater treatment plant. These bonds were originally issued in 2001 and 2002.
“(Interest) rates are at historic lows,” Robertson said.
For example, Robertson, then with Seasongood & Mayer, sold $1.4 million worth of up to 20- year bonds in August 2001 to finance construction of the municipal complex which houses village administrative offices, the police department, council chambers and the Hebron Library. The average interest rate was 5.85 percent.
About $1.2 million of debt service is callable which means it can be reissued at a lower interest rate. Though interest rates change daily, Robertson believes bonds can be reissued at an average interest rate of about 2.84 percent which saves about $100,000 in interest expense over the remaining life of the bonds. The savings is calculated after reissuance expenses are deducted.
Robertson said the municipal complex refunding is the easiest and could be done in less than 30 days.
In a response to a question, Robertson emphasized all three new interest rates would be fixed for the remaining term of the bonds. He told Village Administrator Mike McFarland, “There are no additional covenants written in (the agreements).” Covenants are conditions that require the village to maintain specified minimum fund balances and regularly provide detailed financial information.
Hebron sold $2.8 million of up to 25-year mortgage revenue bonds in 2002 to double the capacity of the water treatment plant. The average interest rate was approximately 5 percent. For both the water and sewer bonds, Hebron pledged the system – the mortgage – and their revenues to the bondholders in the event the village could not payoff the bonds. The village complex bonds don’t include a mortgage on the building, but rather are a pledge of the village’s full faith and credit.
Robertson said the water bonds could be refunded at an average interest rate of 4 percent without extending the original term. That would save about $150,000 in interest costs.
Hebron sold $5 million of up to 25-year mortgage revenue bonds in 2002 to upgrade the wastewater treatment plant. The average interest rate was approximately 5.75 percent. Robertson said the sewer bonds could be refunded at an average interest rate of 3.89 percent, saving more than $210,000 over the remaining life of the bonds.
The water and sewer refunding process is more complicated. Both will require revised official statements and could take about 45 days to complete. The refundings will require Hebron to get a rating from Moody’s Investor Services. “I think we can accomplish an A-1 rating,” he told village officials. Robertson will work with Fiscal Officer Jessica Ethell to apply for the new rating.
Village officials plan to review Robertson’s proposal in detail and legislation authorizing the refunding is expected to be presented to council in August.
In other business, council members unanimously agreed to suspend the three reading rule and declare an emergency to authorize the mayor and fiscal officer to enter into an agreement with The Shelly Company for the North 9th Street/Refugee Road Culvert and Pavement Improvements. The project consists of repaving North 9th Street from U.S. 40 to Refugee Road and then Refugee Road west to the corporation line just west of Canyon Road. The culvert under the entrance to Evans Park would also be replaced.
The project was originally estimated to cost $212,000 with an Ohio Public Works Commission grant funding 62 percent of the cost with the village picking up the remaining 28 percent. Thanks to the low bid from The Shelly Company of $149,697.50, it is now a $188,000 project. The 62/28 percent funding split will be retained.
McFarland told council members that Kokosing Construction Company of Fredericktown, will begin planing the municipal complex parking lot and three village streets on July 28. The company beat out Shelly for the village’s local paving project. The approximately $80,000 job will resurface the ten year old municipal complex parking lot, Sands Drive, Lakewood Drive and Canal Street. Resurfacing was expected to begin August 2.
Council member Jim Friend and Mayor Clifford Mason reported on the fire station renovation/ expansion project. An engineer has determined that the building is structurally sound and capable of withstanding remodeling, Mason said. Friend said most recently firefighters have been commenting on design elements proposed by JBA Archi- tects of Newark. “Some addition will be proposed to council,” Mason said.
Council’s next regular meeting is set for 7:30 p.m. on Wednesday, August 10, at the municipal complex. Council’s combined committees meeting is set for 6 p.m. on Monday, August 15, at the municipal complex.