Hoping to find a less costly way of refinancing its debt — and a cheaper and easier way to borrow in the future — Commerce is hustling to get local legislation introduced to create a public facilities authority.
City manager Pete Pyrzenski, finance director James Wascher, city attorney John Stell and bond attorney Jim Woodward explained at Monday night’s work session how creation of the authority could save the city money in refinancing its current debt and the process for establishing the authority.
The question is whether, this late in the Georgia legislative session there is time to get the bill introduced and passed.
“Timing is the critical issue,” Stell pointed out. Later, he added, “I am concerned if there are enough days to get this done in the General Assembly.”
Currently, when the city needs to borrow money, its options are revenue bonds and general obligation bonds, the former of which require no vote of the public and are secured by pledging the revenue generated by the city, and the latter requiring a vote of the public and secured by the “full faith and credit” of the city. Bonds also carry a “rate covenant,” which requires the city to set utility rates high enough to cover 120 percent of bond payments, and typically require a certain level of cash reserves.
A public facilities authority could issue debt on behalf of the city without a public vote but still backed by the “full faith and credit” of the city, which typically results in a lower interest rate. It would also be relieved of the reserve requirement.
Commerce has $12 million in water and sewerage bonds that could be refinanced to take advantage of historically low interest rates. According to Wascher, utilizing a public facilities authority to issue the new bonds would save the city about $600,000 in interest and free up more than $1 million it is now required to keep in reserves as a condition of its current bond issue. That money could be used to pay down the debt, saving the city another $200,000 over the next 20 years.
For the full story, see the March 6 edition of The Commerce News.