Early payment of bonds, plus no new borrowing, makes Lansing debt-free in 2026
by Melanie Jongsma
LANSING, Ill. (December 18, 2018) – Trustee Jerry Zeldenrust made the following motion at tonight’s Village Board meeting: “Authorize preparation of necessary documents to facilitate the call of $1,000,000 bond on 3/1/2019 and refunding the remaining series 2009A and 2009B bonds.” Trustee Brian Hardy seconded the motion, and the Board approved it unanimously. That motion will save the Village nearly $1 million over the next nine years.
Reviewing and refunding
The motion was a response to recommendations made by Village Treasurer Arlette Frye. At the December 4, 2018, Committee of the Whole meeting, Village Administrator Dan Podgorski drew the Board’s attention to information Frye had provided in a November 28 memo with the subject “G.O. [General Obligation] BOND REVIEW.” Podgorski explained, “From time to time, opportunities present themselves for the Village to consider a refinancing of debt that’s outstanding because interest rates have improved, and/or consider retirement of certain bonds earlier than they normally would be paid back.”
Treasurer Frye’s memo, which the Board had the opportunity to review, outlined her recommendations regarding two bonds that had been taken out for street repairs in 2008–2009—the 2009A general obligation bond of $4,060,000 and the 2009B Motor Fuel Tax bond of $2,775,000.
The Village has been paying interest of at least 4.85% on both the 2009A and the 2009B bonds. Since current interest rates are much lower. Frye recommended refunding (that is, refinancing) both bonds.
In addition, Frye recommended “calling” the 2009B bond in March of 2019. In doing so, the Village can in effect pre-pay $1 million of the bond and then refinance the remaining $1,775,000 as a new bond that can be paid off three years early. “The Village will issue new bonds at a lower interest rate to pay off the old bonds at a higher interest rate,” Frye’s memo explained to the Board. The lower interest rates and the early payment will save the Village $779,322 on that bond over the next nine years.
The 2009A bond can also be refunded at a lower interest rate. Doing so, and maintaining the current payment schedule, will save the Village $167,419.
Working toward financial freedom
The total savings realized through the calling of 2009B and the refunding of both 2009A and 2009B is $946,741. With these changes to these two bonds, and continued payments of other bonds, and no new debts incurred, the Village of Lansing can be debt-free by September of 2026.
Treasurer Frye’s memo to the Board goes into more detailed explanation of the bonds and the payment schedule and is available for download here:
- G.O. BOND REVIEW (November 28, 2018, memo)
Freeing up money for roads
The initial need for these bonds was road improvement projects in 2008–2009. Roads are an ongoing maintenance need, and last year the Village levied $1 million in property tax revenue to be designated for road repairs, approximately three times what had been budgeted in previous years. Although road repair funds can be eaten up quickly, depending on road conditions and asphalt prices, Frye believes that designating $1 million each year is a solid plan that will allow us to maintain a healthy rate of repair and maintenance, and potentially prevent the need to go into debt again.
In addition, once the Village has paid off the Motor Fuel Tax bonds, the $450,000 that was being directed to bond debt reduction will be freed up to spend on streets—”So you should be able to have very significant annual street projects going every year,” said Frye.
Was the increase in vehicle sticker fees to pay for the interest on these loans? I cannot believe that for the past ten years the only road repair I have seen has been on Torrence Avenue in the business district while the neighboring roads fall to ruin. The worse it gets, the more it will cost. Time to start doing what the funds were intended for. You can spend it on making Lansing more attactive with new facilities and play areas, but if the foundation isn’t sound it will crumble.
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