MOREHEAD CITY – The city council on Thursday approved a refinancing agreement that will save Morehead City nearly $ 4.8 million over the term of three loans.
To take advantage of the relatively low current interest rates, the city recently asked several financial institutions for offers for a package to consolidate and refinance three of the city’s existing installment loans. The council held a special session Thursday morning to review the offers and hold a public hearing on the proposed refinancing agreement, during which no one spoke from the public.
The three loans with current principal balances, interest rates and remaining payment years are as follows:
· Land acquisitions and improvements for Katherine Davis Park, balance of $ 2,092,395.99 at 3.05% interest with 15 years payment.
· Construction of a police station and an emergency call center, $ 4,184,706.61 residual capital at an interest rate of 4.125% with 30 years balance.
· Land purchase and construction of Fire Station No. 2, remaining principal of $ 1,820,472.60 at 3.75% interest with 31 years of balance.
The city plans to use it US $ 1.2 million in proceeds from the sale of the former National Guard armory on Bridges Street as a down payment on the police station loan, which reduces the principal balance to approximately $ 3,094,500. When this down payment is factored into the equation, the total principal balance that needs to be refinanced through three loans is $ 7,049,600.
On the recommendation of staff working on the refinancing package, the council on Thursday approved an agreement with Sterling National Bank which, according to Finance Director Jewel Lasater, offered the lowest interest rate on the best terms. Once consolidated, the 15 year loans will have an interest rate of 1.91%, which will cut the payback time in half and result in significant savings for Morehead City.
To pay off the full amount in 15 years – about half the current terms – Morehead City will increase its annual payments by about $ 16,000 per year, making annual debt payments of about $ 544,000. City officials thought this was a fair price to pay for the final savings of $ 4,785,626.36 over the life of the three loans.
“The savings are incredible,” said Councilor David Horton. “Even if (payments) are a little more in the short term, the savings in the long run are enormous.”
If there is a unanimous vote to approve the refinancing, the contract must be signed by the state’s municipal commission before it is closed. The LGC will meet in early January.
Contact Elise Clouser at [email protected]; by phone at 252-726-7081 ext. 229; or follow on Twitter @eliseccnt.