Cottonwood to save more than $1.5 million by refinancing debt
COTTONWOOD -- The Cottonwood City Council in mid-July approved a loan to refinance its 2007-GADA bonds at an interest rate that will save taxpayers nearly $1.5 million. The bond rating service, Standard and Poor's has given the new bond series an "AA-" rating. As defined by S&P: "An obligation rated 'AA' differs from the highest-rated obligations only to a small degree. The obligor's capacity to meet its financial commitment on the obligation is very strong."
The original bonds issued by the Greater Arizona Development Authority were sold in 2007 to help fund construction of the Cottonwood Recreation Center and to group multiple projects including the library expansion of the children's room, land acquisition and the completion of the Riverfront Park youth ball fields into one bonding issue with the for a total of $19.65 million."
City officials explained $13,075,000 remains unpaid of the original loan to be re-financed at an interest rate less than half the original 4.6-percent interest rate, according to Cottonwood's Bond advisor. Grant Hammill of Stifel Nicolaus and Company said Cottonwood expects to sell the remaining bonds for 2.17 percent. That would mean, according to Hammill, the city would save its taxpayers between $1.4 and 1.5 million over the life of the loan.
Cottonwood Fiance Director Rudy Rodriguez said the savings of about $100,000 per year will boost available funds in the General Fund.
Among two opponents of the bond from the public, both Verde Village residents, there was a misunderstanding of the content of the loan, according to the city official. Both claimed the city had no "transparency" here by approving the matter using an "emergency clause," bypassing the need for a second reading.
Rose Sperry, claimed in public comment -- incorrectly, according to Rodriguez -- that the city was simply "kicking the debt down the road," by extending the loan by five years until 2032.
Sherry Twamley, who is a routine critic of the city financing, claimed the city was "like the credit card borrower paying only the minimum amount," and therefore never retiring the debt to pass it on for future generations. Both objected to the city extending the debt an additional five years from the original 2027 until 2032.
"The recreation center is a deeply underwater asset that isn't performing," said Twamley.
That thinking is wrong, according to Rodriguez, who corrected Perry and Twamley's assertions for the council and public. The city is not extending the life of the new loan, "The terms will remain the same." The city will retire the new debt within 20 years, as it originally contracted the loan, in 2027.
The idea is to save taxpayers nearly $1.5 million.