County bond refinances save $28.4 million

August 20, 2012

Summary

Taking advantage of strong credit rating to save taxpayers

Story

The Metropolitan King County Council today unanimously authorized the sale of $65.4 million in sewer revenue refunding bonds. The refinancing lowered interest rates on the bond from between 4.5 and 5 percent to 3.62 percent, saving $7.5 million in 2012, just over 6 percent of the remaining principal on the bonds. The County will save $10.8 million over the 21-year life of the bond.

One bright spot of the sluggish economy has been the ability to reduce costs by refinancing debt. King County has taken full advantage of low interest rates and the county’s strong credit rating, saving taxpayers $28.4 million through bond refinances over the past several weeks.

“Saving $28 million of public money is welcome news during these tough economic times,” said Councilmember Larry Phillips, a member of the Council’s Budget and Fiscal Management Committee. “King County’s sound financial management practices have allowed us to keep reliably delivering core government services with reduced revenues. Seizing on low interest rates and our high credit rating to reduce costs allows us to stretch public dollars even further.”

“This is our third successful refinancing since July 16. During that time, the County has saved taxpayers and ratepayers more than $28 million due to our strong credit and sound financial management,” said Councilmember Joe McDermott, who chairs the Budget & Fiscal Management Committee.

A bond refinancing authorized by the Council on July 16 saved $14.9 million, making it one of the most successful refinancing efforts in King County history. The sale refunded Unlimited Tax General Obligation (UTGO) bonds originally issued in 2004 to expand and seismically retrofit the Harborview Medical Center Campus. It reduced the interest rate on the remaining principle from just under 5 percent to 1.67 percent. The resulting savings represent 14 percent of the remaining principal. This action directly reduces property taxes owed on this voter-approved bond measure.

The second bond refinance, authorized by the King County Council on July 30, was for Limited Tax General Obligation (LTGO) bonds issued to seismically retrofit the historic King County Courthouse. These bonds were refinanced at an interest rate of 1.9 percent, saving King County $6 million over the remaining life of the bonds. This represents a savings of over 10 percent of the remaining principle.

One component enabling such low borrowing costs for King County is that all three bond rating agencies, Moody, Standard & Poor, and Fitch, awarded King County the highest eligible credit ratings at the time of each bond sale.

These ratings reflect King County’s strong management of finances during the economic downturn. Stewardship practices include maintaining ample reserves, conducting frequent audits to identify opportunities to eliminate wasteful spending and better manage county assets, and empowering citizen oversight boards to monitor use of county levy funds.