The Navajo County Board of Supervisors Tuesday approved a plan to save at least $ 600,000 by taking advantage of low interest rates to refinance $ 11 million in debt.
The board also received welcome news that the county has an AA rating – not the best possible, but better than expected by the district’s financial advisor.
“This is excellent rating and good news for the county – and better than we hoped,” said agent Jayson Vowell, who prepares the county bond sale to replace the county’s two outstanding 2012 and 2013 bonds to refinance.
Vowell said that issuing the new bonds at a lower rate should save the county between $ 60,000 and $ 90,000 annually over the next decade.
According to Vowell, the county’s low total debt and healthy reserves resulted in an AA rating instead of the AA-minus rating the consultants originally predicted.
“This is evidence of the board’s financial management,” he added.
County manager Glenn Kephart agreed. “The AA rating is quite remarkable for a rural county our size. I would like to thank the board members who have taken the lead. We could be in a completely different place and we are not thanks to the decisions the board has made in the past. “
Navajo County saw major budget cuts during the last recession, along with sharp declines in property tax and sales tax revenues. Just as the county began to recover, it suffered additional income from the closure of the Peabody Coal Mine and other cuts and shutdowns in the coal-fired power plants it once supplied.
The district endeavored to balance the budget and to continue to provide a comprehensive range of services despite the reduction in staff and income. Fortunately, voters approved the creation of a prison district that generated additional revenue and prevented additional cuts. The district also weathered the business closings caused by the pandemic last year in surprisingly good shape, thanks to government aid and a far smaller than expected impact on the region’s tourist-dominated economy.
“Hats off to the finance department and your leadership,” CEO Daryl Seymore told Kephart.
The decision to quickly refinance to take advantage of historically low interest rates required regulators to declare a fiscal emergency and move forward with the refinancing immediately.
The county appeared to have acted on time, and bond rates are starting to rise – after spending a year at all-time lows.
The Treasury yield on 10-year US bonds has risen from about half a percent to about 1.5 percent since September. The yield on two-year bonds remained close to zero. The shift in bond prices reflects market assumptions that the Federal Reserve will manage to keep inflation close to its target of 2% but that the economy will pick up again after a year of decline. Some economists are forecasting a growth rate of more than 6% for the next year when vaccinations finally contain the pandemic and trigger pent-up demand. The nation’s savings rate has risen over the past year, although the rise in long-term unemployment has widened the gap between the richest and poorest.
The interest rate hike already underway would take some of the savings from Navajo County’s debt refinancing plan.
This will also make it much more expensive for the federal government to continue to post record annual deficits.
The widening gap between short-term and long-term bond rates is known as the “steepness of the curve” and usually signals the beginning of faster economic growth. The reverse trend – with rising and falling short-term interest rates – usually signals the increased chance of a recession.
Peter Aleshire covers county government and other issues for the Independent. He is the former editor of the Payson Roundup. Reach him at [email protected]
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