PANAMA CITY BEACH — Road improvements and beautification projects along Front Beach Road could be finished sooner as a result of a recent City Council decision to refinance the bonds funding the projects.
The council agreed Thursday to refinance more than $43.5 million with a private bank loan instead of a public offering that occurred when the bond was first taken out in 2006. Refinancing would save the city $4.1 million in interest costs during the next 16 years, city financial adviser Jay Glover said.
“We determined that a private placement financing via a bank loan was likely going to result in the maximum amount of savings for the city in this transaction,” Glover told council members at their meeting.
The refinancing will reduce the city’s annual payment on the bonds, which is about $3.8 million, by about $300,000 a year.
That interest savings gives the city more funds to help speed up the beautification and road improvements along on Front Beach Road, CRA director John Alaghemand said Friday. In particular the money could help speed up work on Phase 2 of the project from South Thomas Drive to Richard Jackson Boulevard, Alaghemand said.
“That actually would help us to speed up funding the design,” he said. “The bottom line is the more money, the sooner the project would be undertaken, as well as any additional funding would speed up the construction phase of the project.”
The city is trying to develop a first-class transportation corridor along about 8 miles of Front Beach Road, complete with trolley lanes and walking paths. Officials say the projects should greatly improve traffic flow and safety as well as the aesthetics of the corridor.
The city in 2006 took out $54 million in bonds to fund the CRA projects, which also paid for improvements to side streets off Front Beach Road. Those bonds, which are now down to $43.5 million, can be paid off in 2016, City Manager Mario Gisbert told council members Thursday night. He said interest rates are low, so it’s a good time to move ahead with refinancing to get the savings.
“Because we are close enough to 2016, it sounds and looks like the right time [to refinance], plus interest rates are down,” Gisbert said.
The council unanimously approved a motion to refinance the bonds, but also asked Glover to check with a few more financial institutions to see whether they can offer a better interest rate than the 2.75 percent fixed rate offered by Regions Bank. The current interest rates on the bonds fluctuate between 4 and 5 percent.
“We reached out to four or five banks,” Glover said.
Councilman Keith Curry questioned Glover why he didn’t contact other major players in public finance such as Wells Fargo, JPMorgan Chase and Citigroup. Glover said these institutions hesitate to offer fixed rates on this type of longer-term loans.
“But by no means am I trying to represent that we have reached out to every potential lender that could participate in such a financing,” he said. “We reached out on a limited basis just to a gauge interest, and then, depending on the direction of the city, we can obviously do a more thorough search.”
The council discussed possibly putting out a request for proposals to see what offers come back to refinance the bonds, but balked at that step when Glover said the interest rates could rise in the meantime.
Glover said Region’s fixed rate of 2.75 percent is hard to beat.
He said Bank of America and Pinnacle Public Finance balked at offering a fix rate given the time frame of the loan and its funding source, tax increment financing funds. Those are payments made to the CRA from property tax increases that occur after the district is formed.
“A lot of banks are just not interested in that security source given the volatility we’ve seen in assessed values,” Glover said.