City can save $1.9 million by refinancing Fibrant debt, staff say
SALISBURY — Salisbury can save $1.9 million by refinancing some of the debt the city took on to build Fibrant, a high-speed broadband utility, an assistant city manager said.
City Council will hold a special meeting at 10:30 a.m. Thursday in City Hall to consider refinancing one series of the Certificates of Participation the city issued in 2008 to build the $33 million fiber-to-the-home network.
Refinancing series B would save $1,985,420, said John Sofley, assistant city manager for finance.
The city’s current interest rate is 5.11 percent but since 2008, interest rates have reduced substantially, Sofley said.
STI Institutional & Government Inc. has offered to refinance the outstanding debt at 2.24 percent.
The city issued a total of $35.86 million in bonds in 2008, including $33.56 million for Fibrant and $2.3 million for the general fund.
About $1.2 million went for renovations to municipal buildings, including the City Office Building, City Hall, three fire stations and the Plaza, as well as $725,000 for construction or renovation of three city parking lots.
Collateral for the loan includes the renovated buildings and 250 miles of fiber-optic lines.
To build Fibrant, the city sold two series of Certificates of Participation, or COPS, one for $19.56 million and another for $16.3 million. Bond series A, worth $19.56 million, was sold publicly. Series B, worth $16.3 million, was sold privately to BB&T.
The interest rate was fixed, with serial payments of principal over 20 years. Interest payments began March 1, 2009, and principal payments began March 1, 2010.
So far, the city has paid $8.2 million in principal and interest on Fibrant COPS, Sofley said, and total remaining COPS debt, including interest and principal, is $47.1 million.
In addition to COPS, Fibrant also borrowed money from the city’s water and sewer reserve fund to pay for operations. These internal loans through December 2012 totaled $5 million, Sofley said.
Fibrant will pay back the internal loans at 1 percent interest, he said. Anticipated interest payments for the loans during fiscal year 2013 is about $60,000.
City Council last year adopted a goal related to city-owned utilities like Fibrant to “renegotiate contracts and streamline operations in an effort to reduce operating costs.”
Over the past year, Fibrant General Manager Mike Jury has identified savings of $1 million as contracts have been renegotiated and renewed, according to the city.
Last year, Salisbury saved another $1 million by refinancing a portion of water and sewer revenue bonds.
If City Council approves the refinancing, city staff will work with STI Institutional & Government and the N.C. Local Government Commission to reissue the debt, Sofley said.
Contact reporter Emily Ford at 704-797-4264.