Push to Refinance Bonds Saves the City and Taxpayers Over $300 Million

Faulconer Administration Takes Advantage of Historically Low Interest Rates to Save an Average of Nearly $13m Annually That Can Go Toward Priorities Like Infrastructure Improvements

Wednesday, May 25, 2016 - NEWS RELEASE
 
San Diego – Continuing to bring fiscal responsibility to City government by spending tax dollars wisely and efficiently, Mayor Kevin L. Faulconer announced today that the City’s efforts to take advantage of recent historic lows for interest rates by refinancing a large portion of its municipal bonds has resulted in savings of more than $300 million in future interest payments.
 
“The goal is to get the most value out of every tax dollar. We’re continually looking for new ways to improve City finances and direct the savings right back into our neighborhoods for street repair and other infrastructure improvements,” Mayor Faulconer said. “By taking advantage of historic lows in interest rates, we’re paying millions less in debt and will have millions more available in future budgets for priorities such as roads, water and sewer projects and parks.” 
 
The bond refinancings took place over the course of the past year and involved $1.7 billion in municipal bonds that were used to construct Petco Park, redevelopment projects, neighborhood improvements and various water and wastewater projects. The amount refinanced represents approximately 55% of the City’s total outstanding debt.  
 
The City will pay off this refunded debt in annual installments over the course of 16 to 24 years. After these various refinancings, the average annual savings for the City over this period will be nearly $13 million. Now, instead of paying off debt service, that money can be used for priorities such as fixing streets, upgrading neighborhood infrastructure and funding new water and sewer projects, 
 
Prior to the refinancings, the interest rates for the bonds had averaged as high as 5.9 percent with none below 5 percent. After the refinancings, the interest costs now range from 2.34 percent to 4.04 percent.
 
The following chart lists the refinanced bonds along with the average annual and cumulative savings over the life of the bonds:
 
 

Bond

Refunded Debt

Refinance Date

Avg. Annual Savings

Cumulative Savings (Fiscal Years)

CFD #2*

$10M

June 2015

$120K

$2M (2016-2034)

Wastewater**

$748M

March 2016

$5.3M

$98M (2016-2039)

RDA***

$237M

Jan 2016

$4.6M, City Share $811K

$83M (2017-2034),

City Share $15M

Ballpark

$120.5M

May 2016

$2M

$32M (2017-2032)

Water****

$595M

May 2016

$4.4M

$105M (2017-2040)

CFD #4*****

$10.7M

June 2016

$160K

$3M (2017-2038)

Totals

$1.7B

N/A

$17.4M, City Share $12.8M

$323M, City Share $255M

*CFD stands for Community Facilities Districts – a special Mello-Roos district allowed by state law for financing of public improvements and services. They are commonly used in areas with newer development.

**Combines three series of Wastewater bonds refinanced by 2 bond issuances in 2015 and 2016.

***Redevelopment Agency. The savings benefit is shared by affected local taxing entities, including school districts and the County. The City’s estimated share is 17.5 percent.

**** Anticipated savings.  Refinancing to be finalized this week.

*****Anticipated savings. Refinancing scheduled for first week of June.

CONTACT: Craig Gustafson at (619) 453-9880 or [email protected]