City, community authority also plan to refund bonds
As with the New Albany-Plain Local School District, the city of New Albany and the New Albany Community Authority are refunding bonds this year.
They appear to have used a more traditional method of debt refinancing in the past few years.
New Albany is refunding part of its 2003 debt -- about $12.05 million -- to reduce payments and save the city between $1.2 and $1.8 million.
Interest rates are much lower than in 2003, so officials say the city can refinance the bonds by issuing new ones. Money from the new bonds would be used to pay off the remaining $12.05 million in debt from the 2003 bonds.
The new debt payment, with a lower interest rate, would be on the new bonds, but the term still would end in 2033.
New Albany City Council on March 2 approved the bond sale and agreed May 1 to transfer the funds.
The original $13.46 million in bonds paid for the police station on Reynoldsburg-New Albany Road, the service station on Bevelhymer Road and the sanitary sewer system in the Blacklick business campus. The sewer system, which serves Abercrombie & Fitch, was built in 2000 with $325,000 in bond anticipation notes, which were converted into bonds in 2003 when the rest of the debt was issued, city finance director James Nicholson said.
It is different than what the school district did, because the city will save on interest rates for an estimated seven to 10 years, until the debt is "called," Nicholson said.
"What that means to the city is that should interest rates drop in the future, we would be prohibited from refunding the debt again until within 60 days of the call date," he said. "That date will most likely be somewhere in the range of seven to 10 years from now."
He said in the school district's 2007 refunding, no bonds were "called or retired."
"That's why the term 'synthetic refunding' has been attributed to it," Nicholson said. "The bondholders will continue to hold their investments and the interest rate that they receive will remain the same. Simply put, the school district entered into a side agreement with a third party in which they would pay a reduced fixed rate for the same period of time of the debt in exchange for receiving a lump-sum payment upfront and receiving payments from the counterparty based upon a variable rate."
The New Albany Community Authority board was updated May 2 on the refinancing of up to $7 million in community facilities bonds.
Authority board treasurer Brent Bradbury said the refinancing that was initially approved in January is anticipated to reduce the community authority's payments by $8 million with reduced interest rates, saving $6.5 million over the bond term through 2024.
The bonds were used in the late 1990s to build Fodor Road, improve the Plain Township fire station and build parts of New Albany High School. The authority collects a 4.75-mill annual assessment on properties in the New Albany Country Club community that help pay down debt.
The authority board also approved reissuing $2 million in notes for the infrastructure fund. Since 1997, the community authority has issued $16.7 million in debt to pay for infrastructure at local business parks. In 2004, the community authority refunded the bonds and saved $600,000 on the debt, reducing the total to $16.1 million. Between 2004 and 2010 the community authority repaid $7.3 million on the bonds, reducing the total owed to $8.8 million, according to the community authority's website.
The community authority uses money from an economic-development fund to repay debt. The economic-development fund was created with revenue from income taxes collected from the business parks in New Albany. City spokesperson Scott McAfee said 35 percent goes to the city, 35 percent goes to the New Albany-Plain Local Schools and 30 percent goes into the economic-development fund to pay off debt or pay for new infrastructure in the business parks.