Central Arkansas Water will realize about $708,000 in savings by refinancing a 2010 loan, the agency’s board of commissioners was told Thursday.
The board unanimously approved the sale of the outstanding principal of the bond. By refunding the loan at a lower interest rate, the agency expects to save $44,000 per year on average for the remaining life of the debt, which is set to be paid off in 2030.
Under the new 2.39 percent interest rate, Central Arkansas Water will pay about $8.9 million to pay off the loan, compared with the almost $9.7 million it would have paid without refunding.
In all, between now and October 2030, the utility expects to save $708,241.80.
About $35,000 of that savings will take place this year.
The board of commissioners called a special meeting Thursday to approve the sale, which turned out better than bond sales representatives with Stephens Inc. thought it would. Stephens represented the agency in the sale.
“When we first started talking about this at the beginning of the year, our hope was to be at about 5 percent net present value savings, or about $30,000 to $33,000 a year. Just last month, June 11, interest rates went up and that dropped to about 2.3 percent net present value savings, or $14,000 to $15,000 per year,” said Jack Truemper, senior vice president with Stephens. “Now, the activities that took place around the world the last few weeks caused interest rates to go down.”
The winning bid on the bonds was from City Securities Corp. of Indianapolis.