ISLAMORADA -- When the fiscal year began in October, the village carried a debt load of $18.2 million spread over seven different loans scheduled to be paid down variously between 2019 and 2029.
But as 2012 progresses, Islamorada may look to refinance some of those bonds in order take advantage of today's near record low interest rates.
"If we could refinance, that's just responsible," Finance Director Maria Aguilar said. "It's just trying to take advantage of the low interest rates."
This year, the village is scheduled to spend $1.82 million to pay down $1.06 million in loan principal. Of that total expenditure, $462,000 will come from assessment payments made by customers of the north Plantation Key sewer system and another $220,000 will come from revenue the village collects from customers at the Plantation Yacht Harbor Marina.
The rest, some $1.14 million, will be taken from sales tax revenues that the state passes down to the village. That sales tax money, if not used for debt service, could go toward any number of other government services and daily operating expenses.
It's the drain on those monies that Councilman Ted Blackburn, who spent his career as a bond trader, wants to focus upon.
"One way to cut our expenses and provide more municipal service is to make sure we're not pissing our money away paying excessive debt," said Blackburn, who added that refinancing the debt will be one of his main priorities in the coming year.
In a recent analysis, financial consultant Julie Santamaria of RBC Capital determined that two out of the seven village loans would likely be economical to refinance, whereas the others have conditions, including penalties, that would make refinancing a poor alternative.
The first of those two loans, with a balance of $2.43 million at the start of the fiscal year, was taken out in 2007, primarily for construction of the Founders Park Village Hall and the Lower Matecumbe Key fire station. It carries an interest rate of 4.5 percent and matures in 2026.
The second of those loans, with a balance of $1.2 million, was taken out in 2009 for improvements to the village utility system. The interest rate on the bond is 4.92 percent and payments are scheduled to last through 2029.
In total, those two bonds account for just $3.6 million, approximately one-third of the $11.3 million in debt that the village is primarily paying down with sales taxes.
Santamaria estimates that in the present environment the rates on those loans could be brought down an additional 1 percent or perhaps a bit more. Assuming the same repayment periods, the 1 percent reduction would save approximately $35,000 annually.
"Not a whole lot in terms of wastewater costs, but everything counts," Santamaria said.
Blackburn, though, is advocating a different approach. He'd like to see those two bonds refinanced with a repayment period ending in 2019, the same year the other village loans not bonded by wastewater assessment revenues mature. Shortening the payment periods, Blackburn argues, could enable the village to secure larger reductions in the interest rates. As a result, he said, the loans could likely be repaid on the accelerated schedule he proposes with approximately the same annual payments the village is already making.
In the end, Blackburn said, the sooner the village expunges its debt, the sooner it can use that $1.14 million in sales tax revenue set aside for loan payments this year to better effect.
"The future of Islamorada will only be rosier," he said.
rsilk@keysnews.com
Source: http://keysnews.com/node/37264
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