Interest rates continue to drop, falling to some of their lowest levels in 40 years experts say, and local entities and governments are taking advantage of the market by refinancing bonds.
The county approved two bond refinancings Tuesday that will save a combined $1 million, based on the recommendation of Jamie Wilson, an executive vice president with Merchant Capital. Wilson said interest rates are the lowest he's seen since the late 1960s or early 1970s, proving an excellent time for refinancing outstanding bonds.
An $18.58 million water bond issued in 2004 at 4.67 percent is expected to be refinanced at a 2.62 percent rate, saving the county $903,818. The savings will benefit the county's water fund.
The county also voted to refinance to a $3.37 million loan taken out in 2003 to pay for the expansion of the county's jail. The loan's interest rate will be lowered from 3.4 percent to 1.95 percent, saving $100,698.
Because the jail expansion was a SPLOST project, the $100,698 saved will go toward paying down the loan's principal, instead of having to pay for interest.
Wilson said the biggest issue in securing the expended refinancing rates is that many groups are looking to do the exact same thing.
"What is the tsunami of volume going to do to the marketplace over the next 30-60 days? Hopefully the market can absorb it; it has so far this year," Wilson said.
Hospital refinances Knox Surgical Center bond
Newton Medical Center will be able to save $1.43 million on a refinanced bond originally issued for the construction of the Knox Surgical Center.
The Newton County Hospital Authority originally issued a $22.11 million bond in 1999 for the surgical center, and has now refinanced the loan twice.
The latest was refinancing on the remaining $15.1 million in principal was approved by the hospital authority board at its Feb. 14 meeting. The interest rate was lowered from 4.14 percent to 2.47 percent, though Bank of America remains the bond holder.
Gabe Agan, a vice president with investment firm Morgan Keegan and Company, told the hospital board Feb. 14 that Bank of America was willing to offer a lower interest rate in order to keep the bond in the company. He said Morgan Keegan explored the possibility of publicly issuing the debt, but the Bank of America deal was the best option.
The hospital will save about $20,000 a month, Agan said. Under the new agreement, the bond can again be refinanced beginning Aug. 2018; though officials hope the economy will have recovered by that point, likely pushing interest rates higher.