by John Osborn
Harvard will save more than $40,000 per year over the next 20 years thanks to a timely refunding of $6.6 4 million of its outstanding debt at 1.65 percent interest, one of the lowest in town history.
Town Finance Director Lorraine Leonard announced the “excellent news” last week in an email to the chairs of the Board of Selectmen and the Finance and Capital committees. The interest rate, she told the Press, is “the lowest I've ever personally seen.”
The new offering, which was purchased by low bidder UBS Financial Services, bundles bonds that were first issued in November 2000 and November 2004, as well as the amount paid for two town vehicles. The 2000 bond paid for the public safety building, a remodeling of the Hildreth Elementary School, and the acquisition of two land parcels. The 2004 bond paid for the new library and renovations at Bromfield School.
Because interest on the new bond was so low, Leonard said, the town had included in the offering a DPW truck that was purchased last year for $160,000 and is currently being paid for with a short term bond anticipation note (BAN), and a new large fire engine that was approved last year for $550,000, “but is being purchased for $505,000, a lower than expected bid,” Leonard said.
The immediate effect of bond sale will be to lower next year’s debt service payments by roughly $40,000, or four percent. First Southwest Company, Harvard’s financial advisor, estimates that the total savings over the 20-year life of the bond will be $467,935.
As reported last week, the new bond received a AA++ rating from Standard and Poor’s municipal bond rating group, which cited the Town’s “below-average unemployment rate, very strong income levels, extremely strong wealth, strong available reserves, and low to moderate debt” as positive credit factors.
According to the Massachusetts Department of Revenue, the AA rating means that the capacity of the bond issuer to meet its financial commitment “is very strong.” In its discussion of ratings the department adds, “An obligation rated AA differs from the highest-rated [AAA] obligations only in small degree.”