July 22, 2020 by Carol Britton Meyer
A record-low interest rate of 2.14 percent for the $111 million water system acquisition bonds promises greater-than-expected savings for ratepayers to the tune of $16 million. This is due in large part to the town's recently reaffirmed AAA bond rating by the three top credit-rating agencies.
"The town enjoyed a successful bond sale last week -- the culmination of a great deal of work by a lot of great people, many of whom are on this call tonight," said Town Administrator Tom Mayo during last night's remote Selectmen's meeting. The loan will be paid off in 2050.
Selectman Joseph Fisher, who served as chair last night, praised Selectmen Chair Mary Power for her years of effort on the acquisition of the water system serving Hingham, Hull, and part of Cohasset -- culminating July 31 with the completion of the transition from Aquarion Water Company to Town of Hingham ownership.
"This really has been a team effort for a very long time," Power said. "We originally estimated a savings under town ownership of $48 million [at a projected 3.75 or possibly better interest rate at that time]."
Now, with the much-lower interest rate, the estimated savings is $64 million" over the life of the loan, according to Power. "This is such good news for the ratepayers in the three towns and means more money to invest in, and improve, the infrastructure -- and slower and lower rate increases."
Power attributed this successful transaction to "the quality of effort put forth by so many and our luck with the market timing in creating this great opportunity."
Power said she wants ratepayers to know that those involved with the long process "were very thoughtful and careful in all of this, and are grateful for the Advisory Committee's support."
Mayo praised Power for her leadership, and the work of the entire team involved in the process. "These truly historic rates will allow the town to save money and reinvest in our water system [beyond our expectations]," he said.
Following this conversation, the board approved the issuance of the $111,180,000 general obligation water bonds.
"This is incredible work by all of you, with an incredible result for the town [and the other two towns]," Fisher said.
Let’s hope that a coordinated effort is made to protect our watershed from
Pollution and contamination, and efforts to improve water conservation.
“A record-low interest rate of 2.14 percent ” . . . huh? NB: The coupon rate is the interest rate being paid. How much money was generated in bond premiums? Is the Town going to apply the net bond premium (after payment non-interest cost of borrowing – e.g., underwriting fees, etc.) to pay down the principal amount, which pay down was authorized by the 2019 Town Meeting vote? If not why?
https://emma.msrb.org/IssueView/Details/RE401172
TOWN OF HINGHAM, MASSACHUSETTS GENERAL OBLIGATION WATER BONDS, SERIES 2020 (MA)
CUSIP Principal ($) Security Description Coupon Maturity Date Initial Offering
at Issuance Price Yield
433355VE5 2,185,000 WTR 5% 2/15/2022 107.497 .13
433344VF2 2,290,000 WTR 5% 2/15/2023 112.244 .17
433344VG0 2,405,000 WTR 3% 2/15/2024 109.839 .21
433344VH8 2,480,000 WTR 5% 2/15/2025 121.336 .27
433344VJ4 2,605,000 WTR 5% 2/15/2026 125.186 .4
433344VK1 2,730,000 WTR 5% 2/15/2027 128.628 .54
433344VL9 2,870,000 WTR 5% 2/15/2028 131.964 .65
433344VM7 3,015,000 WTR 4% 2/15/2029 125.76 .7
433344VN5 3,135,000 WTR 4% 2/15/2030 125.186 .81
433344VP0 3,260,000 WTR 4% 2/15/2031 125.186 .91
433344VQ8 3,390,000 WTR 4% 2/15/2032 122.864 1.03
433344VR6 3,524,000 WTR 4% 2/15/2033 121.744 1.16
433344VS4 3,665,000 WTR 3% 2/15/2034 111.403 1.49
433344VT2 3,775,000 WTR 3% 2/15/2035 110.763 1.57
433344VU9 3,890,000 WTR 3% 2/15/2036 110.206 1.64
433344VV7 4,005,000 WTR 3% 2/15/2037 109.81 1.69
433344VW5 4,125,000 WTR 3% 2/15/2038 109.495 1.73
433344VX3 4,250,000 WTR 2% 2/15/2039 100 2
433344VY1 4,335,000 WTR 2% 2/15/2040 99.17 2.05
433344VZ8 2,605,000 WTR 2.375% 2/15/2026 100 2.375
Correction in last line:
CUSIP Principal ($) Description Coupon (%) Maturity Price Yield
433344VZ8 49,245,000 WTR 2.375% 2/15/2026 100 2.375
Editor:
Please post my errata comment that the principal for last bond (433344VZ8) issued at 2.375% coupon (I.e.,face interest rate) is $49,245,000 not $2,605,000, with a maturity date of 2/15/2050 not 2/15/2026.
Whereas just one of the bonds was issued for less than 2.375% (i.e., 433344VY1 $4,335,000 for 2% due 2040) on what basis is the 2.14% rate justified? The total principal amount of the borrowing is $111,179,000.