Cape’s latest bond issue brings total interest cost savings to more than $90 million
The city of Cape Coral’s latest bond issue on Tuesday will save the City almost $34 million in interest costs as compared to the original forecast. Combined with the city’s savings on an earlier bond issue, this brings the total interest cost savings to more than $90 million.
“By making the decision to issue bonds and retire our commercial paper a year earlier than planned, we have been able to take advantage of a favorable bond market,” said City Manager Gary King. “Our bonds once again were sold at a premium (now totaling more than $7 million), which meant they were highly coveted by investors.”
In September, the city refinanced $175 million of Water and Sewer bonds, and received a true interest cost of 4.93 percent. On the advice of King and Financial Services Director Vicki Bateman, City Council recently approved refinancing another $107 million in outstanding commercial paper debt. The city went to the market on Tuesday and obtained an all-inclusive rate of 4.86 percent for the 2011A municipal bonds, slightly better than the low September rate.
“We have made some prudent financial decisions these past few months, and the true winners in this refinancing plan are the citizens of Cape Coral,” said King. “By deciding to take action now, we have been able to avoid potential interest obligations of more than $90 million.”
The city’s prior financial strategy had called for refinancing the outstanding debt in 2012. In this prior plan, the city’s bond agents had estimated interest costs could be about 6 percent in 2012. Due to the current economic conditions and tumbling interest rates, the city determined that refinancing the debt in 2011 and locking in lower rates was a much better financial strategy.
“We also must not underestimate the value of our recent credit rating upgrade from Standard & Poor’s as to the major reason our bonds have been so well received by the market,” added King. “We have improved operational efficiencies and established a more-stable financial position for the city, resulting in that upgrade.”
Source: City of Cape Coral