Bond Re-Fi Could Net $300k In Savings

In a move that could save the town $300,000 or more over the next decade, the Johnston Town Council on Monday night approved a plan to refinance up to $8.775 million of the town's long-term bonds and lower the interest costs on that debt.

Finance Director Joseph Chiodo, during a phone interview Tuesday morning from , said town officials "are in the initial stages of having our financial advisors look into it."

According to Chiodo, the bonds being considered for restructuring — issued in 2004 — currently have a 5.25 percent interest rate; reacting to market rates between 2.75 and 3 percent, town officials decided to pursue what are called "refunding bonds" to get the lower rate.

"We looked at all our general obligation bonds and had everything reviewed to see what would make sense to refinance, and those just jumped out at us," Chiodo explained.

Chiodo also provided a summary of the potential savings, which shows that the original purpose of the bonds was to pay for school and drainage projects, and that of the $8.775 million issued in 2004, about $6.67 million remains to be paid.

Assuming a rate between 2.75 and 3 percent, the town could save more than $300,000 over the 13 years remaining on the bonds' 20-year term — though Chiodo noted that those estimates are "based on the market rates utilized on that date," meaning the actual savings could change, depending on the date that the town actually applies for the refinancing.

Chiodo also noted that the town will not be adding any more years to the terms of the bonds — they will still "mature," or reach full pay-off, in 2024.

The refinancing would apply to roughly one-third of the town's total $24.5 million in long-term debt. During the current fiscal year, the town is spending about $1 million in interest costs on its oustanding bonds, according to the .

Mayor Joseph Polisena, during a phone interview Monday, said the money to be saved "is better in our pockets than in our bond advisors' pockets — we don't have a lot of long-term debt, but what we do have, we want to get the best results from it."