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Town Of Cape Elizabeth
Cape Elizabeth News


Bond refinancing earns premium for schools, town

Refinancing of bonds issued in 1998 and 1999 will save the town and schools more than $200,000 this fiscal year, and more than $740,000 through 2020.

The refinancing was approved by the Town Council in August, with projected savings of $675,000 over the next 10 years, but Town Manager Michael McGovern announced even better savings on the move at the council's meeting Dec. 14, 2009.

"Most of the savings occurs up front in the next few years," McGovern said.

The way the bidders structured the new bonds will result in a "premium" being returned to the town up front, McGovern said.

The 1998 bonds were a reissue of 1994 bonds used to fund renovations to the elementary and middle school; renovations to the Thomas Memorial Library and Town Hall; and, to acquire the Thomas Jordan Trust land. The 1999 bonds funded the renovations to the Donald L. Richards Pool, construction of a new Public Works garage at Cooper Drive; and athletic fields and related infrastructure improvements.

The August refinancing marks the second time the school renovation bonds were refinanced.

The School Department's portion of the premium, $73,110, will be credited to the schools by a Dec. 14 vote of the Town Council. The vote was needed to because the premium is considered revenue.

"This results in a school budget savings for this year of $105,685.18 including the premium and the interest savings," according to the council's Dec. 14 meeting agenda.

The savings has been included in budget calculations prepared by the schools in anticipation of a curtailment in state subsidy this fiscal year.

"The municipal budget had interest savings and a premium of $160,687.64 but is assuming the $41,834.62 costs of issuance, leaving a net municipal budget savings of $118,853.02," the agenda says.

In times of dire financial news locally, regionally and nationally, town councilors were glad of the announced savings and credited McGovern's leadership. "Single handedly, he has managed to get us over $200,000 through his own efforts, his own performance," said Chairman Anne Swift-Kayatta. She said the town is fortunate to have an experienced manager with the financial acumen McGovern exhibits.

McGovern said we were lucky. "It was a really unexpected savings when the budget was being put together last year," he said at the Dec. 15 meeting. At the time the refinancing occurred, interest rates were at a 42-year low, he said. "When you have other issues going on, it's nice that there is at least one piece of good news. Occasionally there are things you can do in a tough economy that work to some good," McGovern said.

The refinancing has reduced interest on the bonds by two-thirds, McGovern said.

Savings breakdown:
School Savings Municipal Savings Total Savings
FY 2010  $   105,685.18  $       118,853.02  $224,538.20
FY 2011  $     53,242.26  $        80,161.48  $133,403.74
FY 2012  $     36,756.87  $        69,681.87  $106,438.74
FY 2013  $     26,041.87  $        63,019.37  $ 89,061.24
FY 2014  $     10,208.12  $        51,214.37  $ 61,422.49
FY 2015  $         102.31  $        44,556.56  $ 44,658.87
FY 2016  $        29,341.25  $ 29,341.25
FY 2017  $        25,105.00  $ 25,105.00
FY 2018  $        16,032.50  $ 16,032.50
FY 2019  $          7,542.50  $   7,542.50
FY 2020  $          4,203.75  $   4,203.75
 $   232,036.61  $       509,711.67  $741,748.28