The city of Elk River is taking advantage of rock-bottom interest rates and a strong credit rating to save about $1 million in interest costs related to bonds issued in 2007 to finance construction of the YMCA.
The city’s Economic Development Authority has agreed to redeem $9.2 million of the 2007 bonds when allowed to do so on Feb. 1, 2017. In the meantime, the EDA will issue a new set of general obligation refunding bonds now to replace the bonds being called to lock in the current low interest rates.
The EDA approved the sale of $9.7 million in new bonds earlier this month to Raymond James and Associates of Memphis, Tenn., the lowest of five bidders. The true interest rate on the new bonds is 2.19 percent. The old bonds carry an interest rate of 4.17 percent.
The new bonds will run through 2033, which is the same final maturity of the refunded bonds.
“These are 20-year bonds. To be able to borrow money for under two and a quarter percent is a very good deal,” Mark Ruff told the EDA. Ruff, of Ehlers and Associates, is a financial advisor to the city.
As part of the process, the credit rating agency Standard and Poor’s has reaffirmed the city’s AA+ credit rating.
EDA Member Pat Dwyer, who chaired the meeting, complimented the city and the finance department on saving the million dollars and on maintaining a high credit rating.
Dwyer said it’s much more difficult to maintain a high credit rating now.
“They (credit rating agencies) are much more critical of the information, looking at it more closely than in the past,” he said.