As millions of homeowners have done during years of record low interest rates, Ascension Parish government is making early moves to refinance nearly $68 million in long-standing debt from past capital improvements.
The loans have paid for a 300-bed, $11 million expansion of Ascension Parish Prison finished in 2009 and a variety of drainage projects, including the 2013 expansion of the Marvin J. Braud Pumping Station and the new $15.8 million Henderson Bayou floodgate completed in the fall near Galvez.
Parish financial advisers have told the Parish Council and the East Ascension Consolidated Gravity Drainage District Board of Commissioners in recent meetings that the refinancing efforts, combined, could save the parish as little as a few million dollars to possibly more than $11 million.
Actual savings depend on what interest rates are when the parish does refinance and what method parish officials decide to employ, the advisers have said.
Jim Ryan, a financial consultant to parish government, told the Parish Council last week it made sense to lock in as low of an interest rate as possible while the opportunity is still available.
He said current projections are that rates will start rising between June and September and will stay that way for a long time.
“You are going to be in a rising interest rate environment long term. I think there’s no way around that,” Ryan said.
The Federal Reserve, which has moved to keep interest rates at record lows in past years to stimulate the post-recession economy, has offered mixed signals more recently about when the central bank felt the economy and inflation rates were strong enough to allow interest rates to rise again.
Federal Reserve Chairwoman Janet Yellen urged Congress on Tuesday to have patience and suggested interest rates would not rise sooner than June, the Associated Press reported.
As part of the refinancing efforts, which the council and drainage commission preliminarily backed in a vote Jan. 22, Feb. 2 and Feb. 19, parish officials are mulling whether to pay off one set of bonds and shorten the term for another. Those two options combined, Ryan told the council Feb. 19, could lead to the largest savings.
The council and drainage commission, which is made of 10 of 11 council members, are looking at refinancing three different bond issues: a 2005 drainage bond issue with $2.21 million left in principal; a 2007 drainage bond issue with nearly $58.4 million in principal left; and a 2007 jail bond issue with $7.25 million in principal.
The 2007 drainage bond issue, which is backed with East Ascension’s half-cent sales tax and 5-mill property tax, is now set to be paid out over 40 years.
Ryan told the council Feb. 19 that shortening the term to 25 years would save the East Ascension drainage $11 million alone. The savings would be dedicated drainage dollars.
The current administration and several council members who first took office when Parish President Tommy Martinez was elected in early 2008 have often aired their discomfort with the length of that bond issue. The bonds were left to them in the final weeks of a prior East Ascension drainage board’s term. At the time, the board was trying to maximize the amount of money available to see through, in part, long-delayed drainage projects promised to voters in the early 1980s. Under the current term, the bonds would not be paid off until 2047.
“I mean I think it’s very unfortunate to pass this kind of debt on to the next generation, in fact, a 30- 40-year debt is like the next generation after that, so please,” Councilwoman Teri Casso told Ryan and bond counsel Malcolm Dugas Jr. on Feb. 19.
Ryan said shortening the 2007 bonds to 25 years — and, thereby, saving $11 million in interest — would increase annual debt payments by $50,000 per year.
Martinez voiced his interest, as did Ryan, in that option and also in paying off the $2.21 million drainage bond issue from 2005 with East Ascension’s hefty dedicated sales tax surplus.
The 2005 bonds would be paid off with a onetime cost of $2.1 million and save $3.2 million in interest payments over the next four years, Ryan noted.
But Council Chairman Randy Clouatre, a former drainage chairman, also aired some concern about drawing too much from the drainage surplus with the number of projects still planned.
“Because we’ve got some projects out there that we’re going to do, that we don’t have a solid budget behind right now. We don’t know the exact costs,” he said.
The refinancing plans have to go before the State Bond Commission. Ryan said he and Dugas plan to come back before parish officials probably in April with more firm figures.
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