City expects $1 million in savings from sale of bonds
Gahanna finance director Jennifer Teal announced to council April 8 that the city's recent advanced refunding of the 2005 bonds was a "great deal for the city," saving more than $1 million through 2030.
"Our bonds are sold with the official closing on April 23," she said. "The figures are firm. We're thrilled with the result."
Teal said the advanced refunding of the bonds was priced April 3, with the final savings associated with the transaction being 10.48 percent, which is more than double the minimum savings requirement of 5 percent outlined in the bond ordinance authorizing the refunding transaction.
The total cash savings through the life of the bonds will be $1.06 million. This year, the city will see cash savings from reduced debt service requirements of $41,545.
From 2014 to 2030, Teal said, the city will see average annual cash savings of $58,000 to $62,000.
"Our timing worked perfectly," she said. "We had a committed team who worked very hard to have those bonds bought."
Teal said Gahanna's outstanding 2007 bonds continue to be monitored, but the savings potential does not approach the 5-percent minimum savings threshold for refinancing at this time.
In other discussion during council's finance committee meeting, chairman Brian Larick said the city's reserve, or carry-over, policy has greatly concerned him.
"When is it appropriate to touch that money?" he said.
Currently, Larick said, there's no sense or definition for when it's appropriate to use the city's reserves.
Teal said she has pulled legislation from Cuyahoga County, where an ordinance defines what circumstances allow using reserves.
"I think that type of ordinance would be appropriate," Teal said.
Mayor Becky Stinchcomb said Ohio law requires a 15-percent reserve but Gahanna requires a mandatory general-fund reserve of 25 percent of planned revenue.
"Many cities went into reserves during the economic downturn," she said. "If we don't pass our income-tax reform, we may talk about this sooner than later."
Larick said it would be helpful to future councils and administrations to define what the reserve fund is, when it's appropriate to use and how it's paid back.
If the city had tapped into its reserve last year, Teal said, the city would be looking at a line item for reserve replenishment.
"It will be good to set up a structure today," she said. "Hopefully, we won't have to use it. It's like having a first-aid kit in a car."