FLINT TWP. — After informally mulling a suggestion to use surplus sewer and water funds to pay off the police department bond debt, the township board has opted to explore a different option.
At its July 15 meeting, the board unanimously approved a motion to seek proposals from various local banks to find the lowest possible interest rates for a loan to pay off the police bond early.
Beth Takacs, controller, recommended seeking the bank loans after researching a second option to refinance the bonds, she said in a memo to the board. Estimates for the refinancing option came in at an average interest rate of about 3.489 percent in addition to costs of about $63,000 for bond issuance and an underwriter’s discount.
The bank loan option would be less costly, Takacs said. She obtained one preliminary quote from a local bank officer for a 12-year loan of $1.4 million with a current interest rate of about 2.6 percent. Attorney fees would be the only additional cost.
The board authorized Takacs to seek similar quotes from other loan institutions, but it is not a binding deal.
Township Supervisor Karyn Miller noted that Takacs findings will come back to the board for an official vote on whether to proceed.
Miller broached the idea back in March of using sewer and water reserve funds to pay off the police bond debt.
“We could borrow the money from ourselves and pay it back at a higher rate of interest than we are earning with CDs,” Miller said.
That plan is estimated to save about half a million dollars. The goal is to pay off the police bond in 10 years instead of 20.
Miller, backed by data from Takacs, has said previously that sewer and water fund reserves are about $6 million so borrowing about $1.4 million from it to pay off the police debt should not adversely affect cash flow.
Some board members expressed reservations about depleting the sewer and water fund in the event of unforeseen emergencies.
It has taken a few years to build up the fund reserve after toughening water bill collection policies, Miller said.
Borrowing from the sewer and water fund has not come up for an official vote.