Aspen debt refinance saves $775,000
December 5, 2009
ASPEN – The city of Aspen is saving taxpayers more than three-quarters of a million dollars using creative financing.
The city recently took advantage of an opportunity to lower the cost on two existing bond issues, saving more than $750,000 over their life. The bonds are set to expire in 2021.
The process is similar to refinancing a mortgage and will save approximately $73,000 a year.
“In the process of doing these bond issues, we were required to talk about the adjustments to the city’s operating budget and fully explain how we have worked to align that budget with our revenue streams going forward,” said city Finance Director Don Taylor.
The city of Aspen this year shaved nearly $4 million off its operating budget, which included 21 layoffs, and eliminating or freezing two dozen positions. The cuts were made in response to falling sales tax revenues.
“The bond rating companies were assured by the financial actions the city had taken, and they are confident in our strong debt service coverage,” Taylor said. “They even raised our bond rating for the parks and open space sales tax revenue bonds, which is an accomplishment in this economic climate.”
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The city’s bond rating was raised from an A+ to an AA- on the parks and open space sales and use-tax revenue bonds, which amount to $7.75 million. The bond rating increase means the city can borrow money at a lower interest rate.
The interest for that bond used to be between 4.5 and 5 percent. With the refinancing, it’s 2.78 percent, Taylor said.
The city is saving $379,911 on the parks and open space sales and use-tax revenue bonds over the life of the bond issue, at present values.
The ratings for the city’s general obligation housing bonds, which amount to $6 million, stayed steady at AA with Standard and Poor’s. With Moody’s Investors Services, the bonds maintained their high rating at Aa2.
The interest rate on the general obligation bonds was between 4.5 and 5 percent. After refinancing, it is 2.62 percent. The city is saving $377,908 on the general obligation bonds over its life of the bond issue.
The city’s debt roughly totals $54.45 million, and the bonds issued are all rated relatively high, Taylor said.