The city stands to save more than $300,000 in interest charges as the St. Clair Board of Aldermen decided to refund the seven remaining years on its certificates of participation.
The board unanimously voted during its most recent meeting to refinance the $1.175 million on the bonds paid by the half-cent transportation tax. The refinancing knocks the interest rate down and sets the new rate at 2.04 percent, City Administrator Rick Childers said.
“This is essentially like refinancing a home mortgage at a lower rate,” Childers told The Missourian after the meeting. “It’s basically just a refinancing that will save the city money.”
The board also approved an additional 10-year COP that will generate $635,000 to help fund water and sewer replacement lines for the Springfield Road project.
That project, which still awaits final approval from the Missouri Department of Transportation, will rebuild the west side of Springfield Road to the city limits, complete with sidewalk and the new sewer and water lines, and resurface the east side of Springfield Road from Highway 30 to South Main Street.
The interest rate on the separate COP is 2.76 percent. The city will pay an annual payment of $73,621.07 for 10 years.
“This is essentially a 10-year note,” Childers said. “We should be able to do this without having to cut into our reserves. We feel this should be within our (financial) means.”
City officials opted to carry the note in order to generate the higher-than-expected monies needed for the water and sewer portion of the road project. Officials have said they are hopeful the project will start in July.
“This will be new money,” Mayor Ron Blum said during the board meeting.
The board was presented with three finance options — 10-, 15- and 20-year terms. The 10-year plan carried the lowest interest rate at the 2.76 percent. The 15-year rate was 3.46 percent and the 20-year rate was 3.97 percent.
Blum said the city originally estimated about $300,000 to replace the water and sewer lines on West Springfield Road from Highway 30 to the city limits, but bids came in at a much higher amount.
“We still feel it’s necessary to replace and improve those lines,” he said. “We feel this is the right approach to take with this project.”
Before asking the aldermen if they were ready to make a motion on the 10-year COP, Blum wanted to make sure there were no questions.
“I want you all to feel comfortable with this,” he said.
There were no questions or objections by the board.
The seven-year refinancing is on 2004 certificates of participation that were coming due later this year, Childers said.
The actual savings is $321,137.
“For some time, we’ve talked about doing this,” he told the aldermen. “Reducing what we have to pay on something we already have, I can’t see any reason not to do it.”
Ward 1 Alderman Zach Fuchs agreed.
“Refinancing is just a smart move,” he said.
Ward 2 Alderman Barb McGlenn also agreed.
“Three-hundred-thousand is a lot to save,” she said.
Before the aldermen voted, Blum wanted to make sure they understood that this refunding is not new money, but the refinancing of the existing COPs.