In other communities, this type of stuff usually doesn’t merit a news release (it’s just part of the job requirements for finance directors to look for the best deal), but here goes – from Knox Co Mayor Tim Burchett’s communication office. Knox County apparently lowered its payments on bond debt. Please read with your political and government jargon index nearby, with the spin filter turned up to a modest 5 (out of 10):
— Knox County taxpayers will save $2.4 million more than originally expected after a planned bond refinance resulted in lower-than-anticipated interest rates. In all, Knox County will save $7.4 million in avoided interest payments thanks to the recent bond refinance of a portion of county debt. The bond sale, which was originally expected to save around $5 million, was proposed by Knox County Mayor Tim Burchett and approved by the Knox County Commission in August.
“While our state and federal governments are having trouble balancing budgets, Knox County continues to find ways to save money through efficiencies, and it’s always great when efforts like this turn out better than planned,” said Mayor Burchett. “When we can save taxpayers millions of dollars by simply refinancing a portion of our debt, we’re going to do it. Common sense steps like this, combined with conservative fiscal budgeting, have put Knox County in a sound financial position.”
Knox County’s high bond rating is a key factor in securing competitive interest rates in the bond market.
“With the current extremely low interest rates and the lack of supply in the municipal market for highly-rated credits such as Knox County, we were pleased that the County’s transactions received nationwide interest and demand, resulting in great bids, extremely low interest rates and savings well above our original projection,” said Joe Ayres, President of Cumberland Securities Company, Inc., Knox County’s Financial Advisor. “The timing to sell a large taxable municipal bond issue that creates savings for the taxpayers worked well for Knox County.”
Since taking office, Mayor Burchett and the Knox County Commission have been able to save taxpayers more than $12 million in interest savings through refinancing opportunities.
This is important because the county is not paying out as much over the life of the bonds, which adds up over the life of the bonds (which can last decades). So by reporting the bottom-line figures, it gives the appearance of huge savings – which is true as a bottom-line. Year to year, the reduction in payment doesn’t appear as great.
This saves money, but also frees up tax dollars to be spent elsewhere. When bonds are issued, governments usually plan for the cost to pay them back over time. So one way of looking at this is a savings for Knox County. Another way of seeing it is there are a few extra bucks that can be redistributed elsewhere. These are my words, now, so don’t take this to the bank (pun intended): It’s doubtful that Knox County residents will see a direct savings in their tax bill as a result of the bond sale. This savings probably won’t amount to a property tax rate adjustment or decrease. For one, the year-to-year savings is probably too small, and in another area – when was the last time you saw government decrease taxes in a non-assessment year?
But, as anyone who has refinanced their mortgage will tell you, every penny saved is money that can be spent elsewhere.