Arnold Likely to Refinance Municipal Bonds

The City of Arnold has a difficult but pleasant decision to make in this bond market.

The city could save about $200,000 yearly, until they year 2027, if councilmen decided to refinance Arnold’s municipal bonds issued in 2003. The 2003 bonds were used to build the Arnold Recreation Center at 1695 Missouri State Road.

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“We are at historic, historic low interest rates,” said Carl Ramey, the Stifel Nicolaus public finance advisor for Arnold.

Refinancing would have city issue new bonds, this year, that have a lower interest rate to essentially replace the bonds issued nearly 10 years ago.

Refinancing would also free $1.25 million used as a reserve fund that supported the 2003 issued bonds.

The city needed the reserve fund because 2003 was the first time Arnold issued a municipal bond, Ramey said.

“Arnold has a very good name (in the municipal bond market),” Ramey said. Institutional and retail investors would most likely purchase Arnold’s new bonds very quickly.

In terms of the savings, the city has three options: store the money saved in the coffers, use the money for needed projects in the city, or pay off the debt two years early. A fourth option is to split the savings towards all three ideas. 

City Attorney Bob Sweeney said the original bond contract limits bond savings towards recreation center projects. 

Sweeney and Ramey spoke during the city council work session at , 2101 Jeffco Blvd., on Feb. 9.

City Treasurer Dan Kroupa said, in a separate city council meeting on Feb. 16, he supported placing the estimated $200,000 savings in the city coffers.

Recreation center construction costs increased 25 percent, to $16 million, from the $12 million originally budgeted, Kroupa said.

The city had to lend about $200,000 yearly from the General Fund to the bond to finance the increased cost.

The refinancing would essentially replace the money lent, in prior years, to pay the bond.

Elected officials need to ensure the city’s long-term financial needs to meet unanticipated residents’ requirements, Kroupa said.

The other uses of the bond refinance was no option, he said.