By Naomi Hatch
The Snowflake Town Council unanimously approved Finance Director Brian Richards’ request last week to refinance a loan to take advantage of lower interest rates.
The town borrowed $4.2 million in 2003 for various purposes under a 20-year loan.
Richards explained that the loan had a 10-year call provision, which meant that it could not be paid off for 10 years or a penalty would be charged. The interest rate on the loan was a variable rate averaging five percent.
The original amount of the loan was $4,240,000 and the outstanding amount is $2,585,000.
Because of the favorable interest rate environment, Richards was seeking approval to refinance the debt at a lower interest rate with Pinnacle Public Finance, which gave the town a bid of 2.09 percent interest, which would result in a net present value savings of $335,801 and not extend the term of the original loan.
The total amount of the new loan would be $2,255,000, because the original reserve cash of $370,000 that has been held in trust will be paid on the loan, so there would be a total debt outstanding difference of minus $330,000 plus 2.64 percent less paid in interest with a total payment savings of $730,059.
“It’s a no brainer,” said Richards.
The council also approved the sale, execution and delivery of Utility Tax Revenue funding obligations.
Richards explained that the town currently has a debt of $1.5 million to the Water Infrastructure Finance Authority (WIFA), which was borrowed in 2002 for the wastewater expansion. He noted that the loan matures in nine years and carries an interest rate of 3.46 percent. Again due to favorable interest rates, he was requesting permission to refinance with Pinnacle Public Finance and borrow an additional $700,000 that would rehabilitate the tank at well site 1 and add a 300,000-gallon storage tank at well site 4, each costing approximately $300,000, and the remaining $100,000 would be used to purchase a new pump and rehabilitate well site 3. This loan would carry an interest rate of 2.09 percent for 10 years and cost the town an average of $31,000 higher payment per year.
Town Manager Paul Watson explained that assuming inflation will come back to the economy, it would be accompanied by higher financing costs and higher construction costs. “It’s pretty good speculation,” he said, explaining that taking advantage of the rates when they’re at their lowest completing these projects when the cost is low would save the town money.
In other business, the council approved Town Engineer Rob Emmitt’s request to pay Wood Patel & Associates an additional $11,250 for the Water System Infrastructure and Energy Master Plan.
He explained that the town was to do in-kind services, noting, “As we got into it a little more, a lot of the technical aspects we were not able to fulfill as a staff.” For that reason, town officials wanted Wood Patel finish the project. The contract will total $46,250.
The council approved Public Works Superintendent Terry Cooper’s request to purchase three Omnisite Monitoring Stations to monitor wastewater lift stations from JCH, Inc. for an amount not to exceed $11,500.
The town has eight wastewater lift stations that perform critical functions in the operations of the wastewater collection, pumping wastewater to a higher elevation to reach gravity flow, explained Cooper. He said that the current alarm notification at most of the lift stations is a red warning light that indicates some kind of failure and that sewage levels are close to overflowing, making immediate response critical. They are dependent on someone noticing the light and reporting it. This new system would be programmed for immediate phone dial-up through a text message or e-mail, depending on the severity of the alert.
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By Naomi Hatch