Archive for Tuesday, August 20, 2002

Douglas County taxpayers would save money after officials take advantage of low interest rates

August 20, 2002

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With interest rates sinking toward 40-year lows, Douglas County officials are going after the same sort of savings many Lawrence homeowners and other government agencies have found through debt refinancing.

County Administrator Craig Weinaug said refinancing would mean saving about $500,000 for taxpayers on $15.8 million of debt Douglas County has on its jail, community health building and a handful of other projects.

"It's significant enough to make it worthwhile to do," Weinaug said. "Every little bit helps."

Douglas County commissioners took Weinaug's advice and agreed Monday morning to refinance nearly half of the county's $32 million debt.

"It's a great opportunity," Commissioner Bob Johnson said. "We should seize it."

Through its broker, the county will sell bonds to pay off $15.8 million in debt accumulated for construction projects since 1993. By refinancing  the bonds are scheduled to hit the open market Sept. 10  the county intends to take advantage of interest rates that have plummeted to levels not seen in the past 15 years and rarely reached since the 1950s.

The county's move follows the leads of other governments and millions of homeowners across the country, who have reworked their longtime debts to free up extra cash.

"We're flirting with record lows," said Greg Vahrenberg, managing director for investment banking in the public finance group of US Bancorp Piper Jaffray in Kansas City, Mo., which is underwriting the county's bond sale. "The process is a little bit different from refinancing a home, but the goal is the same. The goal is to lower your payments and increase your savings."

The city of Lawrence and the Lawrence school district already have trimmed their debt costs in recent years by refinancing. Officials in both governments said the difference between their existing interest rates and current rates wouldn't be enough to cover the administrative costs of refinancing.

But previous moves have paid off, said Kathy Johnson, the school district's finance director. A 1996 refinancing saved $1.68 million, while a 1998 refinancing trimmed another $234,629 in interest costs.

Such savings may help keep property taxes down, she said, but finding new bond savings wouldn't be able to relieve pressure on the district's operating funds, which pay salaries for teachers and keep existing schools running. That's because money for operations is funneled through the state and distributed according to a statewide formula.

Even at the low interest rates, the county shouldn't have any trouble finding buyers for its bonds, Vahrenberg said.

Individual and institutional investors stung by a sagging stock market increasingly are seeking security in bonds, he said. And with a Moody's debt rating of Aa3, Douglas County's debt security rates "clearly among the upper tier" of issuers.

And that means more savings for county taxpayers, whose steady payments through sales and property taxes pay off the principal and interest on the bonds.

"There's less risk and, as a result, investors require less return on their investment," Vahrenberg said. "It makes for a very safe investment in the eyes of investors."

In other action Monday, commissioners:

 Supported the city's plans to annex properties west of Folks Road for future park space.

 Agreed to buy equipment to improve emergency communications, particularly in the southern part of the county.

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