SPRINGDALE — The city will refinance bonds to save money, but will wait for the right time.
The City Council, in its meeting Tuesday, approved moving forward with drawing up documents to refinance bonds sold in 2006 to build Arvest Ballpark and three corridors through the city. A lower interest rate would allow the city to save money over the course of repaying the bonds.
The amount the city would save has changed as rates on bonds have climbed during a volatile stock market over the last few days, said Bob Wright, of Crews & Associates. Crews & Associates, along with Stevens Inc., would handle selling the bonds.
At A Glance
Council Action
Springdale's City Council met Tuesday and approved:
• Settling a condemnation case for land for the Don Tyson Interchange on Interstate 540 with Richard and Carol Lane for $832,500
• Hiring an acquisition service for the 2012 bond program
• A $131,000 payment to USI Consulting Engineers for design of roundabouts on the east extension of Don Tyson Parkway
• Spending $104,000 in forfeitures and unclaimed assets for Police Department equipment
Source: Staff Report
From Thursday to Monday, the interest rate for bonds jumped more than any time since April 1987, Wright said.
“We still believe we can save a substantial amount of money,” Wright said. “We would also reduce by a couple of years the time it would take to pay off the bonds.”
According to figures provided by Wright, the interest on top rated bonds jumped from 2.90 percent on June 3 to 3.86 percent on June 24.
Mayor Doug Sprouse said he thought the refinancing would benefit the city enough to continue. The proposal that was approved by a council committee before rates increased would have saved more than $5 million, Sprouse said.
“Whether we save $5 million or $3 million, I think it’s worth doing,” Sprouse said.
A date to sell new 2013 bonds, that would pay off the old 2006 ones, wasn't set to allow city officials to pick the time when interest rates are the best.
“We can be ready for the sale and move when it would save us the most,” said Alderman Brad Bruns, the chairman of the Finance Committee. “We’ll make sure it’s worth the effort.”
Mike Overton, alderman, asked how much the city would be out if rates become worse and the bond sale is cancelled.
The city wouldn't be charged anything unless a sale takes place, Wright said
“We will come back to you to set a date when we think the time is right,” Wright said
The money to pay off the bonds comes from a 1 percent city sales tax approved by an election in 2003. Any money remaining after required payments are made would redeem more bonds, according to state law. That tax will end when the 2006 bonds are paid, or the 2013 bonds if the refinancing goes through.
Payments on the bonds are made twice a year, in July and January. The city will owe $88.575 million after the July 1 payment is made, according to a city payment schedule. The last 2006 bond would be paid off in 2025, under current projections. The 2013 bonds are projected to be paid off in 2024.