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The City of Roanoke successfully sold $35.96 million in General Obligation and Refunding Bonds, of which $16.8 million was for new capital projects and $19.1 was to refund existing debt, to realize savings associated with lower interest rates. The cost of borrowing the funds was approximately 2.3%, which is a historically low interest rate. By refunding existing debt, the City will reduce its annual debt service thereby saving $727,000 over the life of the debt.
The cost of borrowing and the savings are a result of the City’s strong credit ratings and fiscal policies. In March the City initiated reviews by the three national credit rating agencies: Moody’s, Standard & Poor’s and Fitch which resulted in affirmation of the City’s strong ratings (Aa2, AA+, AA+ respectively).
“The interest rates we received, along with affirmation from all three national rating agencies – all in the midst of a pandemic – exhibit confidence in our economic resiliency and the sound fiscal management of the City. I couldn’t be more pleased,” said Mayor Sherman Lea.
In addition to securing these funds at historically low rates and the savings realized, the City has partnered with Roanoke County and the City of Salem through the Western Virginia Regional Industrial Facility Authority to refinance existing debt the Authority is using in the development of the Wood Haven Technology Park. The City and its partners are in the process of refunding $10.45 million in existing debt having preliminarily secured an interest rate of 2.59%, which will result in debt service savings of $950,000 over the term of the debt – $423,000 in savings for the City of Roanoke.
Combined, these actions will enable the City to invest more than $35 million in the local economy and save over $1 million in financing costs – over $170,000 in FY21 alone.
“These actions ensure we can continue to invest in critical infrastructure such as bridges, sidewalks, stormwater management, and transit, and be as efficient with the taxpayers’ money as possible,” said City Manager Bob Cowell.
The City has been assisted in these efforts by their financial advisors Davenport & Company, LLC. David Rose, Senior Vice-President and Manager of Public Finance at Davenport said, “The City has demonstrated its resilience and ability to swiftly adjust from a financial standpoint to the COVID19 crisis. As a result, major investors including banks and brokerage firms have – and continue to be – willing to partner with the City, and RIFA, thus enabling Roanoke to save several million dollars in interest payments.”