The Cameron Park Community Services District has completed the Community Center refinance.
The 2014 bonds will be 15 years in duration, maturing in 2030 (the same year as the 2005 bonds). The new bonds have an interest rate of 3 percent; the 2005 bonds which had interest rates that ranged from 3.5 percent to 5 percent. The refinance will save the district’s taxpayers approximately $900,000 over the life of the bonds. The bonds are private placement bonds with Umpqua Bank
The 2005 general obligation bonds were issued for $8.7 million. The amount has been refinanced is $7.6 million.
The all-in true interest cost — 3.12 percent — is the real cost of the bond, including ancillary fees and costs, such as finance charges, possible late fees, discount points and prepaid interest, along with factors related to the time value of money.
The CPCSD Board of Directors first heard of the refinancing proposal on May 21 from the investment banking firm of Brandis Tallman. At the meeting, the firm asked the board to approve the proposal in order to lock in the 3-percent interest rate.
However, uncomfortable making the decision on such short notice, the board put it off until the directors could study it further. In June, Rick Brandis and Nicki Tallman reviewed the proposal once again for the board and answered questions that had been brought up at the previous meeting.
The cost of refinancing the bond is $78,000, which includes bond counsel, placement agent, investor’s counsel and other services.
Brandis discussed some of the benefits of a private versus a public placement, including a reduced costs of issuance; locked-in interest rate; no requirement for a credit rating, official statement or continuing disclosure during the life of the bond; streamlined financing and reduced staff time; and the burden of due diligence being on the investor rather than the district.
The board also heard from Richard Han, a managing director with the investment firm of Edward Jones. At the May meeting, Han indicated his company’s interest in bidding on placing the bond. However, during June’s meeting, Han said it would be a disservice to the district and the community to make a proposal since their cost for the placement would be higher and they couldn’t guarantee a lower interest rate than the one offered by Brandis and Tallman in the 45 t0 60 days it would take them to put together a deal.
Director Shiva Frentzen raised the idea of hiring a third-party consultant to review the process and guide the board. However, the idea gained little traction after it was pointed out that Brandis and Tallman and the bond counsel would be providing that service as part of the cost of refinancing the bond.
The board unanimously voted to move forward and the process was completed in early July.