The St. Lucie West Services District is getting a discount. At its last regular meeting, the Board of Supervisors approved an amendment to a 2014 bond refinancing that will save it nearly a cool $1 million.
An unexpected thing happened last year. When Congress passed the tax reform bill, the interest rate on the district’s bonds increased due to changes in the corporate tax structure. The district has three bonds which utility users are paying down. It has two others that come from the district’s general fund. Sun Trust, which holds the bonds, raised the rates in response.
“All of our bonds went up this last year, except for the Lake Harvey bond,” district manager Dennis Pickle said.
Still, the rates were below 4 percent. Except for one. MPS Capital Markets, which handles bonds for the district, noticed it during a review.
“They’d seen where the interest had gone up to 4.17 percent, because of the corporate tax rate,” Pickle said.
The bond was refinanced four years ago. “We did refinance it in 2014, which allowed us to get a lower interest rate,” Pickle said. “This one was at about 5 percent. We chose to refinance it and got it down to 3.6 percent. It stayed there from 2014 until 2018, when it went up to 4.17.”
After Sun Trust and MPS Capital crunched some numbers, the bank figured out a way to drop the interest on that bond to 3.3 percent. “Which is actually lower than it was when we refinanced it,” Pickle said.
The 30-year, $12 million bond was issued around 2005 for system improvements. With the bond amendment, the district is paying about $450,000 on the bond this year. It goes up incrementally until 2031. Then it goes from $564,600 to $2.2 million.
That’s not as big a system shock as it might seem. Before that large jump other bonds will be paid off, reducing the district’s debt service by about $2 million. “This is an odd structure bond,” Pickle said. “The principle is heavy on the last five years.”
The amendment reduces the payoff by about $950,000 over the life of the bond. The district – which hasn’t raised its rates since 2010 – has been aggressive about refinancing bonds. “Overall we’ll save about $22 million over the terms with the bonds we’ve refinanced,” Pickle said.