Newtown saves $1.4 million with new bond
By Melissa Bruen, STAFF WRITER
Published: 10:46 p.m., Tuesday, December 15, 2009
NEWTOWN -- By renegotiating capital bonds, Newtown's finance director saved the town more than $1.4 million. This more than makes up for the state cut in municipal aid this year.
"Bob Tait saved the town $1,430,973.91 on bond refunds over the next three years," said former first selectman Joe Borst at the swearing-in ceremony for new town officials.
The town borrows money for large capital projects that it can't pay for up front.
It notifies banks across the state of the amount it wants to borrow, and the banks respond with their respective interest rates.
When interest rates plummeted, the town seized the opportunity to get a second loan, with a smaller interest rate, to pay off the first loan.
"When the opportunity comes, when you have old bonds at a high-interest rate, you can refund those bonds and save a lot of money," Tait said Monday. "I think a lot of towns were doing it."
He said some of the bonds went back to 2004.
"It reduced our debt service budget," Tait said. "We are paying on a lower rate, so our debt service went down."
The town tries to keep its debt service at less than 10 percent of its annual budget.
Tait said the $1.4 million is spread over three years -- $350,000 will be saved in the 2009-10 budget, $542,000 in the 2010-11 budget, and $538,000 in the 2011-12 budget. The savings are all in interest.
The $350,000 in this year's budget will be put back into the town's fund balance, to be used to pay for budget shortfalls.
"It relieves a little bit of pressure because on the other side of the budget -- on the expenditure side -- because we are getting less money," he said. "Our state grants are decreasing because the state is going through a hard time as well."
State aid to Newtown for 2009-10 went down $250,510 -- most of it because the state made less money this year from gambling revenue at the casinos.
Town revenue is also down this year, because fewer people are getting building permits and the town clerk convenience tax is decreasing area-wide, both of which Tait said are related to the housing market.
"It does cover it -- the short fall in state grants," Tait said, but he said it is not time to celebrate yet. "The state may reduce (municipal funding) even further."
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