In a long-term effort to save more than a million dollars, the Warsaw finance committee is recommending that the town’s old debt be restructured.
The committee, chaired by Peoples Community Bank’s Randy Phelps, suggested the town refinance its Callable Bonds from 2004 and Sewer Revenue Bond from 2007.
The two series would be consolidated into the 2013 General Obligation Refunding Bond to pay off the total debt by 2034 instead of 2047.
The purpose of the restructuring, Town Manager John Slusser pointed out, was not only to shave off a number of years in which the town would have to pay back the debt, but it would also save Warsaw over a million dollars that could be used elsewhere.
“By any measure, $1.2 million is nothing to sneeze at,” said Slusser, who tackled a common public perception that the town was only concerned with collecting taxes.
“It’s not just about that,” said Slusser. “It’s about trying to save people money and managing the town’s finances. We try to be good custodians of the taxpayers’ money every chance we get.”
Currently, the 2004 Callable Bonds stand at $1,020,000 and the 2007 Sewer Revenue Bond at $1,694,000. The total amount that the town would presently have to pay to wipe out both accounts over the next 34 years would come to $4,379,268.39, interest included.
Steve Mulroy, of the Virginia Municipal League/Virginia Associations of Counties Finance, recently presented a loan to the committee that he said would provide greater debt savings.
Through a fixed-rate loan program, Mulroy said Warsaw would issue the loan while VML/VACo Finance plans to purchase the bonds.
Mulroy called the refinancing approach a “real benefit to the town” and praised Slusser for his initiative.
“I think John is being really proactive in finding ways to save the town money,” said Mulroy.
Based on projections in accordance with the proposed solution, the town will have paid $3,092,830.23 in 20 years, with $2,414,000 of the total representing the full loan amount and the remaining $678,830.23 in interest.
Slusser said there would be an intended total savings of $1,286,438.18 for the Town of Warsaw.
As part of why the town chose to refinance their bonds this year, Mulroy and Slusser both pointed out the town was taking advantage of the current interest rate environment, which Slusser added could become harsher should officials wait too long to act.
Milstead said the maneuver would result in significant town savings as well as free up some of the town’s reserve funds.
“Any time you get a better rate, particularly on a large amount of money, and you can afford to do it, I think it’s a good choice,” said Milstead. “It’s not something that you get immediate gratification [from], but going forward, it’ll still be a return on the future.”
In addition to utilizing the finance program, officials are also proposing to put up an equity amount of $300,000 that they aim to contribute to the town’s savings.
Mulroy said while Warsaw would still realize savings with or without the equity, he applauded town officials for their “prudent management” in their efforts to reduce the overall debt.
“They have some cash on-hand that they decided that would be a good use of the funds,” said Mulroy. “Regardless of whether they did that or not, they’re still lowering the total payments.”
Warsaw Town Council will choose whether or not to accept the finance committee’s recommendation at their next meeting on Thursday, Sept. 12 at 7 p.m. in town hall.