MOUNT VERNON — Refinancing at lower interest rates is a good way to save money during tough economic times, but catching the best rates can be a tricky game of timing, said public finance investment advisor David Conley. Conley, of the Columbus firm Robert W. Baird & Company, met with the Knox County Board of Commissioners to discuss possible refinancing options to save the county money.
The first option the commissioners asked about was extending the term of current bonds from 20 to 30 years. Unfortunately, Conley said, the original terms specifically restricted the bonds to 20 years, prohibiting lengthening the terms.
Conley said regular interest rates are hovering around 4.28 percent, after drifting downward from over 5.5 percent just over a year ago to a 12-month low of 3.75 percent at the end of September. This, he said, makes refinancing look attractive.
The big question is whether the rates will sink back down, hold steady or rise, Conley said. If, as many expect, it is the latter, he pointed out that it takes about 60 days to go through the process of arranging, quoting and approving refinancing for governmental bonds.
“We expect interest rates to be stable for the next weeks,” Conley said, but added that the rates have grown far too volatile to predict any further out. He told the commissioners that if they wanted to reinvest any bonds next year, they needed to begin preparatory work now.
The commissioners asked about refinancing three bonds: The bond established to pay for the Knox County Department of Job & Family Services building, the 1998 Child Resource Center, and 1997 and 2000 bonds for projects including the construction of the new sheriff’s office and jail complex, and the board of health building.
The JFS refinancing numbers worked out unfavorably, and would cost the county an additional $32,000 to refinance. Refinancing the resources center bond would save the county almost $51,000 over the period of the loan.
Refinancing the county’s 1997 and 2001 bonds for the jail and the new board of health building offered the biggest savings. Conley said refinancing at the current rate would save the county almost $248,000 over the period of the loan, or that one lump sum of $215,112 could be taken now, with the county’s later monthly payments reverting to current levels. The savings lump sum is lower now, reflecting the projected value that would be added to those savings over the period of the bond.
After conferring with JFS interim director Matthew Kurtz, who endorsed the refinancing of the Child Resources Center bond, the commissioners requested Conley to begin preparatory work on refinancing for the county bonds that offered savings. After the preparations are made, the commissioners will decide when and if they want to refinance, and can lock into rates at that time.
The commissioners also discussed the possibility of using federal stimulus funding, 0-percent financing loans to help finance new sewer system projects in Millwood and Bladensburg.