ST. JOHN | The town’s economic future received a boost recently when Standard & Poor's raised the municipality’s credit rating from an A+ to AA-.
“What that means is that we have the ability to refinance our building corporation bond debt at a lower interest rate and save in excess of $1 million in interest (over the life of the bonds),” said Town Manager Steve Kil.
It also means that residents will see a reduction in their property taxes because of the bond refinancing.
“Tax money that was being used to pay on the corporation bonds will be reduced. The property tax rate per household will decrease. Residents will see that on their property tax bills,” Kil said.
Commercial developers, retail operations and chain restaurants could also show more interest in St. John as a result of the new credit rating and refinancing of debt, he said.
The new S&P rating came about as part of the Town Council’s plan to refinance the $7.305 million in bonds sold by St. John in 2005 and 2006. Those bonds were issued to finance the building of the St. John Municipal Center, police and fire stations and public works building.
Today’s lower interest rates on financing led to the decision to refund the bonds, Kil said.
At their April 27 meeting, Town Council members authorized Kil to proceed with the refunding process for the original bonds which would have matured on or after February 2020. Karl Cender, of accounting firm of Cender & Co., initially estimated a net savings of $939,000 in interest savings in a memo read at that meeting.
Before municipal bonds can be sold, a credit rating agency such as S&P researches and evaluates how the municipality operates and its financial condition.
The better credit rating of AA- will attract more investors willing to purchase the new St. John building corporation bonds being offered for sale during the second week of July, Kil said. That rating will also help lower the interest rate paid on those bonds.
Mesirow Financial of Chicago is serving as underwriter and will sell two sets of new bonds with issue dates of Feb. 1, 2014 and maturity dates of 2026.
The town will pay approximately $145,800 to Mesirow Financial to handle the process of reissuing the bonds. The new bonds can be paid off early, Kil said.
“What is very significant is a 13.5 percent savings on our debt,” he said.