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|Refinancing To Save Utility Ratepayers Half Million Dollars
Posted on September 09, 2005
In 2001, the City of Lawrenceburg and Lawrenceburg Utility Systems issued tax-exempt bonds to finance improvements to the city?s utility infrastructure system. As interest rates have declined in the recent past, City Commission and Utility Board officials began to analyze the potential savings that might result from refunding or refinancing a portion of the original 2001 bond issue.
The refunding of a municipal bond issue is similar in concept to the refinancing of an individual?s mortgage. Lower interest rates achieved through a refunding of earlier bonds save interest cost over the life of the bond issue.
In late 2004, the Utility Board and the City Commission authorized Morgan Keegan to refinance the 2001 bonds. The 2001 bonds had carried an interest rate in excess of 5%. The new refunding bonds have a true interest cost of less than 4%. Thus the new interest rates generated by the refunding allowed the City and the Utilities to realize the significant interest cost savings.
Earlier this summer, the City and Utilities, working with Morgan Keegan, finalized the refinancing of the 2001 bonds saving the over $575,000 in interest cost. It is anticipated that these savings will help offset loss of revenue resulting from the recent Murray announcement.
In accomplishing this refunding, the City of Lawrenceburg and Lawrenceburg Utility Systems joined other well-managed Tennessee cities and utilities in achieving interest cost savings in this historically low interest rate environment which will benefit property taxpayers and utility ratepayers alike.