You can’t borrow your way to prosperity; that’s an often repeated political adage but the city of Clinton is preparing to borrow money in order to save money.
At last night’s meeting of Clinton City Council, City Manager Frank Stovall introduced Lawrence Flynn from the Pope and Zeigler law firm and Teressa Cauley of Southern Municipal Advisors. They informed council that there was an opportunity for the city to issue bonds principally to pay off bond indebtedness from 2005 and 2008.
The trick is that interest on those older bonds ranges from just under 4% to 5%. Interest on a new bond issue would be about 2%. So, a 5 Million dollar bond issue would result in a savings in interest cost of $200,000 as a conservative estimate according to Ms. Cauley.
Mr. Stovall recommended that council pass an ordinance on first reading that authorizes the new bond issue and allow city staff along with their bond advisors to lock in an interest rate to provide a complete picture to council at their next regular monthly meeting.
Mr. Flynn told council that he expects the bond market to remain static until after the national elections and that what happens after that is “anyone’s guess”. He noted that an interest rate could be locked in during the next 30 days and be ready to set before council at their November meeting which will occur on November 5th……the day before the election.
After discussion, council voted unanimously on first reading to proceed with a 5 Million dollar bond issue.
It should be noted that two readings of any proposed ordinance are required. If the estimated savings do not materialize, the first reading approval does not obligate the city to participate in the bond issue.