DANBURY — The city is benefiting from low interest rates as it issues millions of dollars in loans.
The city received a less than 1 percent interest rate on a $12 million, 10-year loan and 0.12 percent net interest costs on a one-year, $50 million loan, said David St. Hilaire, the city’s finance director. On the latter loan, the city will pay $58,000 in interest costs, he said.
He called these rates “incredible.”
“We’ve never seen rates this low,” he told City Council on Wednesday.
Even other municipalities haven’t received rates like this in a long time, the city’s financial adviser and others told Danbury, St. Hilaire said.
“That's reflective of a phenomenal market, but also reflective of the great job you’re all doing in keeping things in check,” he said to the council. “It’s a collection of everything that's being done by the great policies and decisions that are being made by the city of Danbury.”
Rating agencies recently told the city that its outlook on long-term ratings is “stable” and that the city has a “very strong capacity” to pay principal and interest costs when they’re due, Mayor Joe Cavo said.
Standard and Poor’s maintained the city’s AA+ bond rating, while Fitch Ratings again gave the city AAA, which the company says is the “highest credit quality.”
Danbury plans to take advantage of these lower interest rates by refunding up to $27 million of existing bonds from 2011-12.
St. Hilaire expects the city to try to refund between $22-25 million at the end of July, although City Council voted Wednesday to authorize up to $27 million. This could save Danbury at least $2 million, he said.
In refunding, Danbury essentially buys down its high-interest debt and exchanges it for low-interest debt, he said.
Since 2010, Danbury has refunded bonds totaling $125 million and saved $6.6 million, he said. This includes $390,000 in interest savings from a $7.8 million bond last year, according to a letter to City Council.
“That’s helped us tremendously in managing our debt service costs over the years and this next refunding will do the same,” St. Hilaire said. “That combined with the low rates that we’re getting, it does really matter, helping us continue our rather robust capital program. And whether it’s adding schools or paving roads, it all comes together here.”
Danbury has several large projects in the pipeline, including the $99 million career academy.
“Fiscal management pays off for us in the long run,” Cavo said. “It helps us afford to do what a lot of cities and towns can't afford to do.”
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July 11, 2021 at 05:07PM
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Danbury forecasts millions in savings due to low interest rates: ‘We’ve never seen rates this low’ - Danbury News Times
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