Financial adviser recommends refinancing 2009 Motorola lease; city could save about $435,000

David Rose, the city’s financial adviser, told the Hampton City Council the city solicited bids to refinance a 2009 Motorola equipment lease and received an “unprecedented number of bids” from local, regional and national banks. He said the goal was to lower the lease’s roughly 4% interest rate without extending the loan’s final maturity, which remains scheduled for March 2020.

Rose said Bank of America and TD Bank were the top two bids, with Bank of America offering a slightly lower interest rate and a more favorable prepayment provision. "Bank of America was a more favorable provision," Rose said, noting the bank would allow full prepayment on any payment date after half the term has elapsed, giving the city flexibility to extinguish the old loan if it chooses.

Rose presented the projected net savings after issuance costs at about $435,000, compared with an earlier retreat estimate of $339,000 — roughly $100,000 more than expected — and estimated average annual savings of about $109,000. He emphasized that the interest rate would be locked for the remaining four-year term if council approves the resolution prepared by bond counsel. "That 1.1842 interest rate will be the one that you will see for the entire remaining life of the loan," he said.

Council members asked whether the rates are locked until closing and whether an early-payoff penalty existed on the Motorola contract. Rose confirmed the offered rates would be locked for the term if council acts and clarified there was no prepayment penalty on the Motorola contract, which improves the net savings projection.

Next steps laid out by staff include council approval of a resolution on the evening agenda, notifying Motorola (a required 30-day notice), and finalizing numbers between Feb. 26 and March 21 with a target closing around March 10. The council did not take final action during the work session; staff recommended formal action later that day.