Lower interest on VRFA bonds saves taxpayers money

Published 10:47 am Monday, July 6, 2015

Staff report

The Valley Regional Fire Authority’s recent decision to issue refunding bonds has locked in an estimated savings of $976,000 by lowering the interest on $9.9 million of its debt.

Eric Robertson, VRFA administrator, called that a win for taxpayers.

“It’s gratifying to be able to deliver savings to our taxpayers, who are a key pillar of support for the fire department,” said Robertson. “A key goal of ours is being good stewards of the funding our citizens provide us.”

The VRFA recently received a Standard & Poor’s Rating Services upgrade from ‘A’ to ‘AA-‘ for its existing debt and for the Unlimited Tax General Obligation Refunding Bonds, 2015. The rating has a stable outlook. The refunding bonds were priced by their bond underwriters and closed on June 10.

“It is our goal to prudently manage the resources our community has entrusted us with, and refinancing debt at lower interest rates has helped achieve that goal,” said Algona Mayor Dave Hill, chairman of the VRFA Board of Governance. “Our timing in the market was very good, resulting in net saving of nearly $1 million in lower debt service between now and 2028. The authority’s management team has done an exception job on behalf of the taxpayers.”

The strong credit ratings contributed to low interest rates of 2.18 percent when the VRFA’s bond underwriters marketed and priced the refunding bonds, Robertson said.

The bonds refunded $9.9 million of the VRFA’s UTGO Refunding bonds, originally authorized by the voters in 2008 when the VRFA formed in the amount of $19.8 million.

According to S&P. the upgraded rating reflects its view of the VRFA’s:

• Large and growing tax base;

• Good financial management practices, including multi-year financial forecasting and a long-term capital plan;

• Strong cash positions

• History of voter support for fire benefit service charge and capital levies;

Strong available reserves that are likely stay strong for the next five years; and

• Low-to-moderate debt, relative to the tax base.

The AA rating is one of the highest ratings S&P assigns to a special purpose district. Washington state has an S&P raring of AA+. The AA rating is defined as differing from the higher-rated obligations only to a small degree, meaning the authority’s ability to meet its financial commitment on its bonds is strong.