Decatur seeks lower interest rate on its debtDecatur City Hall.
The city of Decatur has bills to pay. The building projects the city has undertaken, which include new fire stations, streetscape upgrades and bike lanes, weren’t cheap.
But the city is looking for a way to reduce some of the burden of its debt by seeking lower interest rates.
During the Feb. 2 City Commission meeting, commissioners approved a plan to restructure $2.8 million in certificates of participation, money the city borrowed to renovate and expand city hall. The city will be able to reduce the interest rate from 3.91 percent to 2.6 percent, saving $132,000. There is $1.8 million in remaining principal and the city will be making payments through 2026.
Commissioners also gave their blessing for the city manager to seek a lower interest rate on the city’s $33 million general obligation bond, issued in 2007. The city spent $16.6 million of the bond on various projects, including upgrades to fire stations, and improvements at Glenlake Park and the Decatur Cemetery, a memo from Arnold says.
The rest went to City Schools of Decatur for its facility needs, Arnold said.
Assistant City Manager Andrea Arnold told commissioners the outstanding balance of the bond is $28 million.
Arnold said the expectation is that the interest rates will rise before the bonds are callable in 2017, meaning they “can be redeemed by the issuer prior to its maturity,” according to Investopedia.com. An advance refunding would allow the city to potentially lock in a lower interest rate, Arnold said.
“Over the term of the bonds, we would save about $3.5 million,” she said. The current interest rate for the 2007 GO bond is 4.375 percent.
City commissioners unanimously approved the idea, and Arnold said closing with the newer rates could occur in early April.
The debt discussion comes as the city is considering pursuing another GO bond for school construction. During his recent State of the City Address, Mayor Jim Baskett said the city will seek a GO bond referendum this November to cover the costs of expanding school facilities to accommodate increasing enrollment. Decatur has issued a significant amount of debt since 2005, borrowing $154.2 million since 2005 to pay for city projects.