Lancaster City Hall 2018

Lancaster City Hall

Lancaster’s city council approved a debt refinancing plan Tuesday evening that is designed to save the city $7.1 million in interest payments.

The council members in attendance voted unanimously to approve the issuance of new bonds, with the money raised used to pay off previous debts, most of which were issued in 2011.

A total of $38,125,000 in bonds was approved for issue.

Most of the savings will be realized upfront. Between now and 2024, the city will save $9.6 million in interest costs. But some of those savings are lost over the following eight years as the amount the city is required to pay on the bonds goes up.

Daryl Peck, a financial adviser with Concord Public Finance who worked on the new bond package, said the city’s total expected savings in interest costs is the equivalent of 17.5% of the total debt.

“That’s just kind of unheard of,” he said, adding that saving 3% is generally considered a good deal. Interest rates are very low right now, he explained, which created a favorable opportunity for the city.

Patrick Hopkins, the city’s business administrator, said the bond issue also involved the city receiving an updated credit check. He said Moody’s, a credit rating agency, rated the city’s reliability as a borrower at A3, which is considered upper medium grade. The higher a borrower’s rating, the less it is typically required to pay in interest.

Mayor Danene Sorace and City Council President Ismail Smith-Wade El said there are no current plans to spend the savings on specific programs. Instead, they said, the savings will improve the city’s financial standing and potentially offset the need for future tax increases.

In total, Lancaster city has a little over $373 million in outstanding debt.

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