BLYTHEWOOD – After voting on April 5 to refinance the 2010 $5 million Blythewood Facilities Corporation (BFC) bonds, Council closed on the refinancing with BB&T bank on June 5. Emily Luther, an attorney with Parker Poe of Columbia who handled the initial 2010 bond issuance, updated Town Council on the refinancing at its May 26 meeting. But the update included substantially different information than was presented at the April 5 meeting regarding how much interest savings the Town would realize from the refinancing.
“The new (2018) bonds will allow the town to save about $15,000 per year over the remaining term of the bonds,” Luther said. She said the 2010 bond interest rate of 4 – 5 percent was reduced to 3.65 percent with the refinancing through BB&T.
Luther said the Town will realize additional savings with the release of its $358,475 debt service reserve funds that the Town had been required to be set aside in 2010 as security on the loan. That amount equals principle and interest on the loan for one year. Mayor J. Michael Ross said that, instead of taking that money out, Council would use it to apply it to what is owed on the bond.
“The Town authorized about $4.1 million to accomplish the refunding but, based on the interest savings, you’re only going to be financing about $3.965 million,” Luther said.
Still, the new savings numbers are substantially different than what Luther and Brent Robertson with Stifel Nicolaus and Company of Columbia, presented on April 5 when Council voted to initiate the refinancing.
At that meeting, Luther and Robertson said that, with the refinancing interest rate of 3.65 percent and the release of the debt service reserve funds, Blythewood would realize an estimated savings of $51,000 the first year and $25,000 annually, thereafter, for a total savings of $470,000 over the life of the bond.
When The Voice asked why the savings to the Town had been estimated at $25,000 annually during the April 5 meeting and $15,000 annually at the May 26 meeting, Luther answered in the following email to Town Administrator Brian Cook and included a third new savings estimate.
“The final debt service schedules show savings to the Town in its debt service payments of approximately $17,000 to $23,000 per year. The amount of savings that the Town has in any one particular year is based on the debt service requirements of the 2010 Bonds versus the new debt service requirements of the 2018 Bond,” Luther wrote. “The amounts as presented at the April meeting versus the later meeting were different because, at the April meeting,” she wrote, “the Town did not yet have the final term sheet with BB&T and the savings amounts were based on estimates and projections which is typical until a final term sheet or purchase contract is executed. The above savings ranges are based on the actual principal amount of the 2018 Bond issued as well as the actual interest rate.”
Luther did not include an amount of what the total savings would be over the life of the bond based on the new interest savings ranges.
Asked to clarify Luther’s email about the changes in interest savings, Ross attributed it to the service fees charged on the transaction.
“We all knew the lawyers, financial consultants and everybody involved would have charges for service. Looking at the bottom line, though, it was a great savings for the town and if interest rates start going up then we really did good,” Ross said.
