CLAREMORE (Source: Salesha Wilken Claremore Daily Progress, Okla. (MCT) — The Claremore City Council voted unanimously Monday night to approve a measure that will refinance the city’s $24.5 million debt, extending payments to 2025.
City officials report the action will save the city an approximate $8 million shortfall that was set to occur in 2014.
The cost to the city will be $689,946 in refinance fees; however the fees will not be paid up front, but included in the new bond.
A lengthy discussion was held as city accountant Ron Kolker, explained the financial impact of the decision to the council.
“If the bond is not approved tonight the city will not be able to refinance the bond until December 2012 and there is no guarantee of what interest rates will be,” Kolker said.
This is a similar process that occurred when the bond was refinanced a few years ago. City officials believe this bond includes a better prediction of future revenues.
“This bond solves our cash flow problems and doesn’t cost anything up front,” Kolker said.
City councilors Paula Watson and Brandon Smith questioned the terms of the contract.
“Why does the payment go up over the time,” Watson said.
Smith was concerned about the specific figures as the principle and interest payments equalized during 2022.
Kolker explained that the payment varies due to a change in interest and principal balance in 2022.
The bond will include a 3.28 percent interest cost with interest rates increasing to approximately 4.55 percent. The rate increase will occur in 2022 when one of the three original bond debts will be paid off.
The increase will affect the bond balance and payment will increase during the final three years of the total term.
The bond payments will be paid through sales tax revenue and all estimates are dependent on projected sales tax revenue for the next 13 years.
“If we don’t approve this we are going to run out of money,” Kolker said.
Kolker also explained that these terms related to the city’s A- credit rating.
“This rating is not bad for a city of our size,” he said.
Previously, city officials had made statements about the amount of debt the city has compared to other cities of the same size.
Additionally, city officials held no discussions relating to the impact the recent petition by Rogers County officials to increase sales tax rates across the county will have on future bond payments.
Kolker simply explained that this bond is based on current predictions of sales tax revenue.
©2012 the Claremore Daily Progress (Claremore, Okla.)
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