The information below comes from the Park District of Highland Park.
Anyone who has refinanced a mortgage knows that the lower the interest rate, the more money you save.
The Park District of Highland Park saved big on July 27, when it took advantage of lower interest rates on the refunding of $6,770,000 in General Obligation Limited Tax Refunding Debt Certificates, and by so doing, saved the District approximately $643,873 over the next ten years.
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The Park District’s debt obligation was incurred in 2004 and 2005, both issuances to construct the Recreation Center of Highland Park. When the District’s debt was executed, interest rates were as high 4.8 percent. Refunding the debt lowered the interest rate to an average of 1.8 percent realizing a net present value benefit of 8.6 percent on the refunded principal.
Terms of the original bonds restrict the frequency of refunding to just once during the life of the debt certificates. Working with financial advisors, the Park District determined that with interest rates low, and the District’s credit rating strong, the time was right to take advantage of the one-time refunding opportunity.
The District’s recent review by the highest rating assigned to a unit of government and a rarity in today’s economic climate. According to Finance Director Elliott Becker, the bank qualified market is a 'seller’s' market. Banks are seeking very strong credit ratings which are in short supply, and strong credit ratings result in competitive interest rates.
Interest saved must be held in escrow until the original bond’s ten year stipulation is met. Illinois State General Obligation Bonds were secured to serve as escrow. The state bonds will mature no later than the first quarter of 2014.
“The $643,873 saved on interest will contribute to the District’s goal of sustainability,” states Becker. “This money will be much better spent providing programs and services to the families of Highland Park.”