BLYTHEWOOD – After suggesting last month that the Town of Blythewood might want to consider taking advantage of advance refunding to refinance its $5.5 million bond issued in 2010 by the Blythewood Facilities Corporation (BFC), attorney Ray Jones of Parker Poe, returned to a Council workshop last week to advise the Town to hold off on the refinancing for now.
To take advantage of the refinancing, Council would have to pass an ordinance with two readings and a public hearing.
“To the extent that the market is not with us today, and it appears it will not be with us through the rest of the year, we will have to hit pause because we would not then be able to refinance this debt until June 1, 2018, at the earliest,” Jones said at the workshop.
Town Administrator Gary Parker explained last month how advance refunding works.
“It’s a financing technique that allows an issuer to obtain the benefit of lower interest rates when the outstanding bonds are not currently callable. The 2010 bonds are callable at the Town’s option on Sept. 1, 2018, or at any time within 90 days before that date,” Parker said.
Jones told Council last month that because Congress is considering dropping advance refunding as part of their tax reform law proposal, and because interest rates were lower than they may be in the summer of 2018 when the 2010 bonds are callable, they might want to act right away.
“Originally, we were looking at a total savings of about $318,000 to do the advance refunding last month,” Jones said. “The rate estimate at that time was three percent. We certainly thought that was worth coming to talk to you about.”
While Jones said Whitney Bank now offers two rates – 1) 3.05 percent with a catch; the bank would hold that rate if there are no changes in the tax law and 2) 3.75 percent, a rate the bank would automatically adjust if the tax reform passed. Jones said the 3.75 percent is a more realistic rate.
“With that rate, however, the Town’s savings from refinancing would shrink by $60,000,” Jones said.
“By going ahead and passing the refinancing ordinance now,” Jones advised Council, “we’ll be in a position to move when the market is there again.”
Council will vote on the ordinance at the next council meeting.
