November 19, 2019

Now is a Good Time to Consider Refinancing Debt

Much like refinancing a home, municipalities can consider refinancing debt. Now is a good time to do it. Over the past 12 months the municipal bond market has seen a sharp drop in interest rates. Common thought is that this is a response to the stock market volatility caused by the threat of trade wars and other global uncertainties impacting investor confidence. As investors race to find secure and stable returns, the municipal bond market benefits from the increased demand driving down yields. While no one can predict how long rates will remain low or if they could go lower, municipalities may be able to realize cost savings by refinancing existing debt obligations.

Kentucky League of Cities (KLC) is uniquely positioned to help municipalities capture these savings through the Kentucky Bond Corporation (KBC) program. By building a robust bond program, partnering with industry leaders and committing its own financial resources, KLC has established financing programs that are uncomplicated for municipal members.

The KBC program minimizes the capital constraints typically required when financing deals backed by a revenue source (e.g., water and sewer bonds). The debt service reserve fund for all KBC revenue lease agreements in 2019 has averaged two percent of the total borrowing amount which is significantly lower than typical revenue supported obligations.   In 2019 alone, the KBC bond program has helped cities save nearly $2.5 million over the term of the deals. The total savings will be realized as cities see the interest rates on their existing debt reduced to the new current market fixed rate.

In 2019 alone, the KBC bond program has helped cities save nearly $2.5 million over the term of the deals. The total savings will be realized as cities see the interest rates on their existing debt reduced to the new current market fixed rates.

Additionally, the program offers 100% financing and borrowers have no out-of-pocket expenses. All required costs for the issuance of debt are included in the information presented to help determine if significant savings can be achieved.

Don’t delay. Now is the time to consider refinancing outstanding debt to determine if potential savings are available for your city. Contact KLC’s Steven Pickarski at 859-977-3743 to get the process started today.