AUBURN — Township Trustees are exploring the possibility of refinancing two loans from 2011 and 2016 to potentially save the township up to about $860,000 with interest rates at all-time lows.

The 2011 fire station improvement USDA loan, which was originally about $2.5 million and has a maturity date of July 1, 2040, has an outstanding debt obligation of nearly $1.96 million. The 2016 service garage construction bond, which was originally $2 million with a maturity date of April 22, 2041, has an outstanding debt obligation of nearly $1.79 million, for a total of about $3.7 million in outstanding debt eligible for refinancing.

The trustees authorized Fiscal Officer Fred May on Monday to explore a private placement process with Sudsina & Associates, LLC, which could shorten the maturity of the bonds to 15 years with increased payments per year.

“Your transactions done in 2011 and 2016 had higher interest rates, which were kind of reminiscent of the time,” said Stephen Szanto, managing director of Sudsina & Associates. “Since then, rates have dropped.”

Right at the start of the pandemic last March, interest rates were as high as about 3.3 percent, said Greg Van Wagnen, senior advisor of the municipal advising firm. Current rates are between 0.1 percent and 1.8 percent, depending on the maturity of a loan.

Mr. Szanto explained that rates were lower than they’ve ever been in his 40-year tenure in financing, with the exception of this past week where rates had spiked a bit.

Mr. Van Wagnen explained that the interest rates increased due to the success of vaccines. The economy is expected to rebound as the country eventually recovers from the COVID-19 pandemic, he said. But because full recovery from the pandemic is still a long ways ahead, interest rates so far have still remained low, comparatively.

Mr. Szanto and Mr. Van Wagnen talked the trustees through two refinancing options, including the private placement process and a public offering model, explaining the two methods include trade-offs.

Through the public offering, the trustees are likely to save more money down the road with lower interest rates, assuming the interest rates remain low, he said, which is hard to determine since the entire process can take between 90 and 120 days before bidding out the township’s debt.

The private placement, on the other hand, is still likely to give the township large savings and in a shorter amount of time, potentially six to nine weeks, by selling debt directly to buying banks, but not without a higher demand for work from the township and has higher interest rates than the public offering.

While the rates would be higher than a public offering, he added, if Auburn moves forward with a private placement refinancing model, their new rates on their debt would still be lower than their current rates, which are at 4.125 percent for the 2011 USDA loan and 3.6 percent for the 2016 construction bond.

The trustees agreed that the private placement would be the way to go should they ultimately decide to move forward with refinancing.

“I do think that time is of the essence here and that we should move as soon as we can,” Mr. May said, adding that he feels more comfortable refinancing with Sudsina & Associates due to their local connection, having received their recommendation from Bainbridge Fiscal Officer Janice Sugarman and noting that they financed the county’s new administration buildings currently under construction.

He said the township may take more risk than benefit from the public offering model because of the timeframe and rates expected to potentially increase as the COVID-19 vaccine rollout is underway.

Mr. Szanto told the trustees that unless they actually move forward with a bidder, they will not be billed by Sudsina & Associates for contacting the potential bidders.

Trustees Patrick J. Cavanagh and John Eberly agreed that it would be good to have this in writing in a contract after further exploration of the potential refinancing decision. Mr. Cavanagh added that the township would like to retain the right of the fiscal officer to consult the trustees for assistance should he need it.

Sam joined the Times in 2019 and covers several communities and schools in the Chagrin Valley and Geauga County. She also oversees the features/community events and the website. She earned her bachelor's degree in journalism from Kent State University.

(0) comments

Welcome to the discussion.

Keep it Clean. Please avoid obscene, vulgar, lewd, racist or sexually-oriented language.
PLEASE TURN OFF YOUR CAPS LOCK.
Don't Threaten. Threats of harming another person will not be tolerated.
Be Truthful. Don't knowingly lie about anyone or anything.
Be Nice. No racism, sexism or any sort of -ism that is degrading to another person.
Be Proactive. Use the 'Report' link on each comment to let us know of abusive posts.
Share with Us. We'd love to hear eyewitness accounts, the history behind an article.