Toccoa City Commissioners and staff will continue to study the options for re-financing $6 million in Georgia Environmental Finance Authority debt.
Commissioners discussed the topic again during a work session Monday.
Brian Ubell from Robert W. Baird and Associates of Atlanta again appeared before commissioners with additional information as requested by the commission when it tabled the issue on February 11.
Currently, the city has just over $6 million in GEFA water/wastewater fund debt in three different debts with interest rates ranging from 3.75 to 5.21 percent.
According to Baird, they believe the city could refinance the debt as one loan going out until 2021, which is the same end date as the longest current loan, but at a lower interest rate of 2.25 percent.
That would save about $325,000, according to Ubell.
Commissioners had asked about the savings if they paid the $75,000 fee to re-finance the loan up front, rather than finance it in.
Ubell said the city would then save more over the life of the loan.
“If you choose to fund it with bond proceeds, your savings over the term of the debt is $325,000 versus what you would pay over the life of your existing debt,” said Ubell. “If you paid (the fee) upfront, outside of the bond transaction, your savings would be about $407,000.”
It was noted that the city would need nearly seven years to re-coup the $75,000.
In addition, the commission had asked about the difference in savings if the loan were paid off earlier by keeping the payments the same, rather than shrinking the payments.
Ubell said the city would increase its total savings over the life of the loan by about $30,000, but would not see that savings until the loan were paid off in late 2020, just a few months earlier.
“You would actually have an increased savings as a result of that structure, but it would be back-end loaded,” said Ubell. “You’re trading savings every year for savings in your last year.”
Toccoa Vice-Mayor Andy Pavliscsak asked about paying off one of the loans, in the amount of $230,000, completely by using the Commission Reserve Account and re-financing only the two larger loans. However, City Commissioner Terry Carter and Mayor David Austin said they would not want to take money from the commission reserve account to do that considering the city’s cash flow situation.
Commissioners also asked why, if it was a single loan, the payment structure was set up to decrease as if it were still three loans. Ubell says that is because his firm attempted to show equal savings throughout the life of the loan.
While commissioners did not commit to any re-financing terms, the commission did vote unanimously during its meeting following the work session to use Baird to re-finance the debt.
Vice-Mayor Andy Pavliscsak said it would be good for staff and Baird to continue to work on different options.
“I can see the confusion when they look at my fellow commissioners,” said Pavliscsak. “We are talking re-financing debt and I want to feel perfectly comfortable with this process when we do this.”
Staff said they will continue to work with Baird and come back before the commission.