Debt refinancing saves Brentwood big bucks

The City of Brentwood should eventually save about $270,000 from a recent transaction where it sold two older series of bonds in favor of a newer one.

The city sold its Series 2006 Water Bonds and its 2007 General Obligation Bonds and replaced them with $3.9 million worth of 2017 bonds at a lower interest rate of 1.79 percent, according to a City of Brentwood news release.

“Much like you would refinance your mortgage for a cheaper interest rate, in laymen’s terms,” Brentwood City Treasurer Karen Harper said.

The city does this kind of refinancing when market conditions look favorable.

“It depends on the market, whether it’s an attractive process to go through or not,” Harper said. “Looking at all the moving parts — the fees incurred, the interest rate. And we have a policy that we go by to determine whether it will be attractive to the city to do that or not.”

One steadfast part of that policy is that the city will only issue “refunding” bonds — as it did with this recent transaction — if the savings from such bonds will be at least three percent.

“If we can’t save at least three percent then it’s not advisable to go forward,” Harper said. This current sale will generate savings in excess of seven percent.

Brentwood’s bonds are especially desirable on the market due to the strength of the city’s credit, Harper said. According to the news release, in 2008 Brentwood became the first city in Tennessee to receive the highest credit ratings from both Moody’s Investors Service and Standard & Poor’s. The Aaa rating from Moody’s was confirmed again with this latest bond issuance.

The issuance of bonds is a regular part of the city’s financial operations, as Harper explained.

“The bonds are issued, we bid them out, and then the lowest bidder gets them and goes on the open market and sells them,” Harper said. “It’s a way the city gets money for capital projects.”

Harper said that the last time the city had a “refunding” like this was in 2016.