Like many homeowners and private businesses, the City of Newport News
borrows cash for large capital projects (like public buildings or street and sewer projects). When the funds are borrowed to support the City’s Capital Improvement Plan (CIP), the debt is known as General Obligation Bonds (GO Bonds). The term of the bonds is generally twenty years, but when the bond matures after ten years, the City can review the debt to determine if refinancing it to a lower rate is an option.
Due to favorable market conditions, the City was recently able to refund $33,190,000 of General Obligation Bonds to refinance a portion of its existing capital debt.
The refunding was a great success, with the City’s GO Bonds generating good demand and investor interest in the market. As a result, the refunding bonds were priced at an interest rate of 2.01% (True Interest Cost) and generated $2,450,708.08 of Net Present Value savings. This means that on a cash flow basis over the life of the bonds, Newport News will save about $2.4 million in debt payments over the life of the bonds. This is one of the best interest rates the City has experienced in recent years.