May 8, 2019
Contact: Supervisor’s Office (631)283-6055
The Town of Southampton, following a stellar financial report from Moody’s Investors Service, re-financed $13.3 million in outstanding debt. The Town achieved a savings of $725,000 over a ten-year period by reducing interest rates from an average of 3.09% to an average new rate of 1.42%. The term of the existing bonds remain the same, but the interest rates are significantly lower.
At a certain point in the life of a bond, the note becomes “callable”. This means that any remaining debt can be paid off without penalty. The Town issued new borrowing with a term matching the remaining life of the existing bonds. The new revenue will be used to pay off the existing loans, replacing them with new loans at significantly lower interest rates. For example, the Town will see a savings of $110,000 in each of the next three years.
The Town also realized significantly lower rates than anticipated on its current year capital program borrowing, the lowest bidder being Citigroup Global Markets, Inc. at 2.313%. “Our strong financial standing allows us to borrow at very low interest rates, thereby providing significant savings to taxpayers,” said Supervisor Jay Schneiderman. “We timed our borrowing to hit the bond market at a time when interest rates were at their lowest point in recent years,” noted Comptroller Len Marchese.