Radnor Township Advanced Refunding Of The Township’s 2012 Series Bonds

Press release from the Township of Radnor:

Posted on: October 30, 2020

The Radnor Township Board of Commissioners comprehensive long-term fiscal planning has once again paid off. On October 27, the advanced refunding of the Township’s 2012 series bonds aimed at capitalizing on the low interest rate environment, by borrowing new bonds at a lower interest rate, saved the Township more than $94,000 per year for the next seventeen years. The market conditions, coupled with the Commissioners support and approval, allowed for this successful transaction.

“The refunding ordinance let us position ourselves to act quickly and refund the bonds for a lower interest rate when market conditions become favorable,” said Finance Director, Bob Tate. “Such significant savings reduce the Township’s borrowing costs, thereby allowing us to allocate the savings.”

In early 2007, the Township borrowed $15,910,000 primarily for the construction of a new municipal building and other, smaller capital projects. When first issued, the debt was committed to mostly interest payments for the first seventeen years. As a result, the forecasted interest expense on the 30-year term was $18.9 million. In 2012, due to then historic interest rate lows, these bonds were refunded and generated savings of $1,569,887 (from 2012 – 2037).

Now, in 2020, these bonds have been refunded again due to today’s continued historically low interest rates, generating additional savings of $1,344,603. In total, thanks to the two refunding transactions, these bonds are $2,914,490 cheaper now than they were when originally borrowed. These savings amounts are shown at cash value (not net present value) and are net of cost of issuance.

Since 2010, Radnor has successfully refunded seven (x7) different times, generating a total savings of roughly $6,800,000 over the remaining terms of the various bonds. “In every case, the refunding has maintained the same maturity,” said White. “In other words, Radnor is not generating savings by extending the life of the bonds.” Without refunding, the 2021 debt service expense savings would have been $452,000 higher than they now are.

The successful bond refunding comes on the heels of the Township’s bond rating reaffirmation by Moody’s Global Rating Services. In last week’s announcement, Moody’s announced that Radnor Township has maintained its strong financial rating at Aa1 for the Township’s 2020 GO Bond issue, the second highest rating the firm confers.

“The multi-year, exemplary credit rating of Radnor’s bonds is benefiting the Township, thanks to strong financial management and stewardship of taxpayer dollars on the part of the Commissioners,” said White. “As noted in the Moody’s release, our credit rating and strong financial structure is critical to maximizing savings when we are in the market. If we’re to expect future opportunities, we’ll need to remain fiscally strong.”

Ultimately, it is the Radnor Township Department of Finance regular review of the Township’s current debt and continued analysis of savings opportunities that sparked these transactions. “Thank you to our Finance Department, partnered with our bond council Cozen O’Connor, underwriting firm Boenning & Scattergood, and pricing agent PFM, for teaming up to realize these savings,” said White.

The table below reflects the cash flow savings summary from the October 27 transaction and documents the $1,344,603 in savings the Township will realize over the next 17 years.

RADNOR TOWNSHIP DEPARTMENT OF FINANCE: The mission of the Finance Department is to professionally, ethically, and effectively manage the Township's financial resources by identifying, developing, advancing, and implementing fiscal, human resource, and administrative strategies, policies, and practices for the public's benefit.

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This press release was produced by the Township of Radnor. The views expressed here are the author’s own.