At a Special City Council meeting tonight, Director of Public Works Patrick Hopkins presented the Council with the results of today’s bond auction. According to Hopkins, the auction was a considerable success, as the interest rate offered by bidders dropped over 0.6% from the initial to the final bid of 4.33%. In the long-term, this 0.6% alone amounts to $2.2 million in savings.
Nevertheless, these savings come in the midst of still greater losses after having issued a variable bond rate in 2004, which, because of recent economic turmoil, has become unmanageable. And, in order to terminate the existing deal, the City is required to pay Wachovia an up-front multi-million dollar termination fee. Ultimately, Hopkins characterized the any success of the day as being simply the lesser of evils.
As Hopkins explained it, “It turns out that the total cost here, if you just look at the 1998 bonds versus these 2009 bonds in isolation, we’re saving about $600,000…And then you have the termination fees with Wachovia, which is about $3.9 million. So the net total cost of this was about $3.3 million, which is far better than the $4.3 million that we talked about at the last finance committee.”