$9.9M bond sale scheduled for Dec. 11

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OCEAN CITY – Council unanimously approved two resolutions providing for a $9.9 million bond sale for the city at its Nov. 15 meeting.

This bond sale, scheduled for Dec. 11, is what city director of finance Frank Donato is calling “Plan B.”

The city had initially attempted to sell $16.75 million in bonds earlier this fall, but the plan was rejected by the state Local Finance Board due to its nonconforming maturity schedule.

“It’s not that we got denied, we didn’t even get a seat at the table,” Donato said.

He said that the nonconforming schedule – meaning lower than normal principal payments in the first few years – meant the city had to have state approval to move forward.

Because the bond sale is taking place two years early to take advantage of what Donato called “historically low interest rates,” the city would incur principal payments for two years it had not planned for. This is what prompted the city to ask for a nonconforming schedule.

On that nonconforming schedule, the 16.75 million sale would have resulted in a .5-cent impact on the budget, Donato said. A conforming schedule, he said, would have been more than 1 cent.

The new $9.9 million bond sale will have a conforming maturity schedule, so it does not require state approval.

“We put that schedule together because it’s going to have relatively the same impact as the $16.75 million nonconforming schedule would have,” Donato said.

Keeping the bond sale under $10 million means this sale would be bank qualified, which brings a few more investors to the table, he said, as well as a more attractive interest rate.

Donato estimated that the $16.75 million bond sale would have resulted in $1 million in savings to the taxpayers over the life of the bond. He said he is uncertain of what specific savings this new bond sale would bring.

“If we could get below 1 percent (interest rate), it’s a real homerun to the taxpayers,” he said.

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