The Guardian-Journal, 09-20-07, MICHELLE BATES, Editor
The Homer Town Council voted to pass a resolution to refinance the bond issues for Homer Memorial Hospital that is expected to save the hospital approximately $280,000 over the course of what’s left of the life of the loan.
The hospital has had bond debt that paid for renovations that took place several years ago, and right now, the hospital is still paying on that loan.
“Due to favorable interest rates now, compared to what they were, there’s an opportunity for the hospital to experience some savings in the balance of the debt that would allow them to pay the debt off a little bit sooner and save a substantial amount of money over the course of that loan,” said Jim Colvin, Homer’s town attorney.
Wes Shafto, a bond attorney out of Monroe, came to the meeting to explain to the council the benefits of refinancing the bond debt.
The current balance left on the loan is approximately $2.1 million, and refinancing would knock a full percentage point off the interest of the loan and the bank that has purchased the loan has agreed to waiver the “reserve fund” that was established when the hospital accrued the loan. The current percentage point is 6.5 and it will go down to 5.3 percent.
“What that means is that there is approximately $280,000 sitting in a reserve fund to back up the original bonds,” Shafto said. “That would allow the hospital to take that amount that’s currently on account and apply it to the outstanding debt service and then refund it at a percentage point less. It is a substantial amount of savings for the hospital.”
The term of the loan will not be extended and nothing else will change. The hospital will still continue to pay the monthly note as it always has, but it will just be paid off sooner and money will be saved.
What’s happening is that another bond issue is being floated to pay off the original bond debt. All expenses, including the bond attorney’s fees, are included in the new set of bond issues.
Homer Town Councilman J.C. Moore brought up a good point in asking if the new bond issues would cover the current renovations taking place now at the hospital. The answer was no, because the money used to build the new emergency room and the renovations taking place inside the hospital are coming from reserve funds that the hospital saved over the course of several years.
“It’s merely coincidental that these two issues are coming up at the same time,” Colvin said.
