Hazelwood Claims it Timed the Market Right In Refinancing General Obligation Bonds
Hazelwood’s new finance director says the City of Hazelwood timed the market perfectly in May by refunding the outstanding Series 2005 General Obligation Street Bonds (GOs) scheduled for maturing in the years 2016 and thereafter through Stifel Nicolaus & Company, a regional brokerage and investment firm. Hazelwood’s Finance Director Lori Helle said that the outstanding Series 2005 Bonds have coupons that are much higher than current market interest rates.
A pending ordinance authorizing the issuance, sale and delivery of these GOs was on the Council agenda for a second reading . However, the favorable interest rate environment prompted Hazelwood’s City Council to give Stifel the go ahead to make this transaction, netting the City a net cash flow savings of $348,584, or 6.63 percent. This return of investment was much more than the required three percent savings stated in the bill.
Before the ordinance could be read a second time, City Attorney Kevin O’Keefe inserted an amendment to it. Mark Grimm, an attorney with Gilmore & Bell, was present at the City Council meeting to explain the difference between the original bill and the amended one. “The interest rate environment was extremely favorable to the City of Hazelwood,” Grimm said. “The size of the refunding was up-sized slightly to refinance one additional maturity of the refunded bonds.”
Grimm went on to say that the plan had been to refinance bonds maturing in 2017 and thereafter. “But because of a favorable interest rate environment, it was deemed appropriate to refinance bonds maturing in 2016 and thereafter instead,” he added.
GOs represent a promise by the issuer to levy enough taxes as necessary to make full and timely payments on Hazelwood’s debts or to the City of Hazelwood’s investors. When they are refinanced at a lower interest rate, it means taxpayers pay back a lower amount in taxes on the back end.
According to City Attorney O’Keefe, “This does not authorize any new taxes that have not previously been approved by the voters. The taxpayers received substantial savings, which will be reflected in a lower rate necessary to retire these obligations in years moving forward.”
“We timed it perfectly by going to market when we did,” Helle said. “If we waited any longer, we would have missed our window of opportunity as evident by the fact that interest rates are now going back up.”
Laura Radcliff, with the public finance department of Stifel, Nicolaus & Company, had this to say about Helle during the Council meeting, “I told Lori today that I was impressed that in her first quarter of employment as finance director, she’s already saved the City of Hazelwood almost half a million dollars. (Information from this story was provided by the City of Hazelwood Communications director)
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