Refinancing bonds that were used to fund two parking ramps in Jamestown could potentially save the city nearly $600,000.
During Monday night's City Council meeting, members discussed the possibility of refinancing the bonds, as well as the hurdles that they could face in the future.
Parking ramps located on Main Street and Cherry Street were originally funded by bonds purchased through the Chautauqua County Industrial Development Agency. According to Joe Bellito, city comptroller, the city is currently paying those bonds back at an interest rate of 5.9 percent. In recent talks with a fiscal adviser, it has become clear that it would be possible to lower that rate by approximately 2 percent.
"We went through the CCIDA and used their bonds to finance the ramps on Cherry Street and Main Street," said Bellito. "I've been working on this with the bond council and our fiscal adviser for the past three months now. It's a little different because the bond council had to look through all of the legalities of paying off the IDA bonds but we're hoping to save approximately $600,000 over the remaining 18 years of debt payments on these ramps."
The $600,000 in savings over the remaining life of the loan would translate to roughly $35,000 in savings every year for the next 18 years.
According to Vince DeJoy, D-Ward 4, many of the bonds aren't callable until 2015 and until then, more than $5 million of the funds will remain in escrow.
"Refinancing now is a good option because we're in a very favorable time in terms of interest rates and bonds," said DeJoy. "Another thing that was discussed within the finance committee meeting is that there is a potential elimination of tax exemption for municipal bonds in the future."
The possible elimination of the tax-exempt status for bonds comes from a proposal that would remove that status from the issuing authorities. The idea, which has been floating around for several years at this point, could create a massive shift in the price of bonds as well as the interest rates that accompany them. According to Bellito, "this move would primarily be used to close loopholes in the federal deficit, and that would drive our costs up. Any current bonds should be grandfathered in with tax-exempt status."
"We should be urging our congressional delegation not to support the move to take away the tax exemption of municipal bonds as part of any budget reconciliation discussion," said Mayor Sam Teresi. "It's incredibly important for not only municipalities and public power companies, but anyone out there that is looking to finance bridges, buildings or large-scale capital equipment. It's nothing but a tax shift from the federal government to the local government, so I would strongly encourage the council add its voice to the growing voice across the country to leave these bonds alone."