Richmond, VA — Under the direction of Mayor Levar M. Stoney, the city is acting quickly to potentially save millions in debt service payments prior to changes in federal tax law.
City finance officials have been working with the city’s financial advisors and bond counsel to pursue an advance refunding of bonds originally issued in 2013 and 2014. The savings opportunities were made possible with the early completion of the FY2017 Comprehensive Annual Financial Report (CAFR), and the reported $16.9 million general fund surplus.
An advance refunding is a financing technique allowing an issuer to obtain the benefit of lower interest rates when the outstanding bonds are not currently callable.
During the next 15 years (over the life of the bonds), savings from this refunding are conservatively estimated to be $3 to $4 million, but these savings are not yet guaranteed and are subject to changes in market conditions until the bonds are sold.
Typically, the city would take advantage of an advance refunding of its debt at any time when interest rate savings are favorable. However, due to recent tax legislation proposed by both the U.S. House of Representatives and U.S. Senate, the ability to do an advance refunding would be eliminated after December 31, 2017.
The introduction and adoption of the refunding resolution put forth by the mayor and administration authorizes the advance refunding with the potential for the city to save millions of dollars before this tax law change.
There will be a special meeting of City Council on the evening of November 30 in council chambers to address the resolution.
“Through this refinancing, we can save millions of dollars,” said Mayor Stoney. “I applaud our Finance Department for identifying this opportunity, and appreciate City Council’s flexibility to act quickly on this matter.”