City finance staff say refinancing 2018 capital bonds could save about $1.9 million

Dave Wheeler, the city's director of banking, investments and debt, told the Enterprise and Labor Relations Committee on July 20 that the city is seeking authorization to issue refunding bonds to call certain maturities of its 2018 general obligation capital improvement bonds.

"Refunding issuance could provide us with approximately $1,900,000 in interest cost savings over the next 10 years," Wheeler said, noting the 2018 issue becomes callable on Dec. 1 and that staff expects to call maturities through 2036. He described the plan as analogous to refinancing a home mortgage to reduce interest costs.

Wheeler told the committee the proposal would allow the city to refund the whole amount of the 2018 issue if warranted by market conditions, but that staff currently expects to call maturities through 2036 because savings beyond that horizon are not projected to improve. He said the plan could be coupled with a separate 2026 various-purpose bond issue to improve overall savings.

Chair Linnea Palmisano described the approach as "outside the box thinking" and welcomed potential savings, saying the anticipated $2,000,000 range would be useful given the city's fiscal picture. Wheeler stood for questions and explained the mechanics: the city would issue new bonds, use proceeds to pay off called maturities of the 2018 bonds on or after Dec. 1, and retain flexibility to refund remaining maturities later if market conditions change.

The bond-refunding authorization was listed on the committee's consent agenda and approved by the committee; the chair indicated related items could return to council on July 30 for additional consideration.