The city of Sumner refinanced $4.36 million of limited tax general obligation bonds for a savings of $226,000 during the next 10 years.
The bonds were re-issued at an interest rate of 3.67 percent. They were originally issued in 1998 and 1999 at a rate of 4.67 percent and used to fund construction costs of Sumner Meadows Golf Links and an expansion to City Hall.
“We had a great day at the market,” said Deputy City Administrator Diane Supler. “With the decline in interest rates it just looked like a good opportunity to go to the market, and it turned out to be true.”
It will cost the city $21,355 to refinance the bond issues, Supler said.
Refinancing the bonds coincides with an upgrade of Sumner’s bond rating from “A” to “A+” by Standard and Poor’s. The highest category is “AAA” and next highest is “AA.”
“Most cities fall into the ‘A’ category,” Supler said.
The increased rating reflects industrial and commercial growth, the city’s credit history, existing debt structure, management practices of the city and the city’s financial condition, according to a report prepared by Standard and Poor’s. The upgrade in rating helps reduce costs of borrowing money.
In two weeks, the city will look at refinancing a water sewer revenue bond, which should cost slightly more than the bonds refinanced this week, Supler said.
General obligation debt is borrowed money used for capital projects that is secured by the city’s general tax revenues, including property and sales tax. The water sewer revenue bond is backed by the city’s utilities.
The 1998 and 1999 bonds are 20-year issues that will mature in 2018 and 2019, respectively.
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