Oxford Township and Village taxpayers are going to save nearly $500,000 over the next six years as they continue to pay off outstanding debt related to the public library and fire department, but at much lower interest rates.
Last week, the township board voted 7-0 to award the sale of $5.465 million in refunding bonds to Fifth Third Securities, Inc.
‘The bonds were sold at excellent rates,? reported attorney Tom Colis, of Miller, Canfield, Paddock and Stone, the Detroit-based firm that serves as the township’s bond counsel.
Interest rates on the new bonds range from 1.5 to 2.75 percent as opposed to the current 4.6 percent on the library bonds and 4.7-5.1 percent on the fire bonds.
The original library bonds were issued in 1996 to construct and furnish the Pontiac Rd. facility. The original fire bonds were issued in 2000 for the construction of two fire stations and the purchase of six new vehicles. Both bond issues were approved by township and village voters, who are assessed separate millages to pay off each of the debts.
The township will close on the refunding bond issue March 25 and receive $5.465 million in proceeds, which represents the combined principal owed on the library and fire debts, plus $5,000 for interest.
This money will be placed in an escrow account and used to pay off the original private bondholders on May 1.
After that, the township will begin paying off the refunding bonds at much lower interest rates over the next six years.
As a result, taxpayers will realize a net cumulative savings of $488,000 between 2011 and 2016, when the bond debt is paid off.
Colis told officials that’s ‘about an 8.5 percent savings over what you were going to pay for the rest of the bonds if you didn’t do anything with respect to these existing bonds.?
This is a direct savings to the taxpayers.
‘That’s not savings to the general fund of the township because the township levies a millage for this. This is savings to the actual taxpayers,? he explained. ‘So, on their tax bill, they’ll see a reduction of the millage that’s required to pay debt service on the bonds.?
According to projections provided to officials, township and village property owners will see their overall debt tax decrease by a total of 0.76 mill between 2011-16. That works out to a 0.30-mill savings on the library debt tax and a 0.46-mill savings on the fire debt tax.
And thanks to the refunding, taxpayers will pay one less millage beginning next year.
‘We’ve combined the two issues into one,? Colis said. ‘There will just be one debt millage as opposed to the two separate debt millages.?
Six investment banking firms placed bids for the township’s refunding bonds.
‘We’re used to seeing about three to four bids on most bond issues,? Colis explained. ‘Six (bids) means that there’s very high interest in the township’s debt obligations.?
‘They were very competitive bids and the winning bidder was Fifth Third Securities,? he said. ‘They produced the lowest interest cost total for the remaining outstanding debt.?
‘This has got to be very unusual for the township to be lowering their (interest rates) on bonds with a declining tax market,? noted township Supervisor Bill Dunn.
‘It is an unusual environment that we’re in,? Colis said.
Despite the ‘general economic stress? throughout the state and country, he indicated ‘the municipal bond market is still a positive market.?
But it was Standard and Poor’s reaffirmation of the township’s AA bond rating that was the largest factor in making this whole deal so favorable to Oxford taxpayers.
Colis said the rating was ‘excellent news considering the economy that we’re in.?
The bond rating system goes from AAA, which is the highest, to junk bond status, the lowest.
‘The fact that you have a AA rating that makes all the difference,? Colis told officials. ‘If we were a single A or even an A+, you would have seen a lot different (interest) rates which would have meant your savings would have been much less. That makes all the difference with some bonds.?
Colis indicated township officials deserve all the credit for the AA rating.
‘It’s a testament to the board ? the policies that they have in place (and) the financial management of the elected officials,? he said.
It was noted the township’s bond rating is higher than the State of Michigan’s, which is AA-.