Kane County expecting $2.4M savings from refinancing bonds
By Linda Girardi For The Courier-News March 14, 2013 5:13PM
Updated: April 16, 2013 3:24PM
Kane County will save almost $2.4 million by refinancing $29 million in bonds in a competitive online reverse auction.
“This is like eBay in reverse,” said David Phillips of Speer Financial, referring to the reversal of the roles of buyer and seller.
Phillips, who oversaw Kane County’s first-ever online bond auction this week, said seven financial institutions from across the country competed in a 15-minute bond auction to offer the lowest absolute interest rate to the county.
“I sometimes equate the online bond auction to a horse race — everybody intends to win,” Phillips said, adding the bidders had an option to improve their bid to out-distance the competition.
On Tuesday, the Kane County Board authorized the approval of the low bid from Robert W. Baird & Co. of Milwaukee, at an interest rate of 2.14 percent.
The other bidders were investment firms from New York, Chicago, Philadelphia and Charlotte, N.C.
Phillips said the bid auction will save taxpayers $2.359 million — about an equal savings of $320,000 each year through the maturity of the bonds in 2024.
The combined interest rate was 4.37 percent on outstanding debt certificates from 2005 and 2006 for the construction of the Kane County jail and a 2002 bond, Phillips said.
“The county could have refinanced the bonds the old-fashioned way when faxing was more prevalent,” Phillips said. “This allows the bidders to bid with the freshest information possible.”
County board Chairman Chris Lauzen said the planning for refinancing began in December.
“We knew we had potential to save a substantial amount of money,” Lauzen said, referring to a conversation with county Auditor Terry Hunt and Treasurer David Rickert, as well as a community volunteer representative with a financial background, Dick Hawks of Aurora.
“With the crisis of the day in Washington, D.C., it is moving these markets all around,” Lauzen said. “What we have done is like refinancing our mortgage. I would anticipate a year from now interest rates will be significantly higher.”