OCEAN CITY — The Town of Ocean City this week scored a considerable windfall when it awarded a bid for the resale of over $5.2 million in bonds dating back to 2007 at a low interest rate, netting nearly half a million dollars in savings.
Based on a recommendation from Finance Director Martha Bennett and the town’s financial consultant Davenport and Company, the Mayor and Council on Tuesday voted to approve the bond sale, essentially a refinancing, to TD Bank at an extremely low interest rate of 1.92 percent. The proceeds of the sale will be used to refund nearly $5 million in Ocean City Municipal Purpose Refunding Bonds dating back to 2007, which were expected to mature from 2019 to 2027.
In April, the Mayor and Council approved an ordinance allowing for the refunding of the bonds. Bids were solicited and returned last Wednesday. Bennett said seven bids were received from major finance companies with astoundingly low interest rates ranging from 1.92 to 2.73. After Bennett and Sam Ketterman of Davenport, the town’s financial consultant for the sale, reviewed the bids, it was recommended the bond sale be awarded to TD Bank and its 1.97 percent interest rate.
When the ordinance was approved in April, Bennett told the Mayor and Council the anticipated savings from the refund could be as much as $390,000. However, when the bids were opened and the low bid from TD Bank was accepted, the actual figure announced on Tuesday came in at $482,120.
“This is very exciting news,” said Bennett. “We were able to refund more bonds then we anticipated. We’re very pleased with the result. This is an extraordinary amount of savings.”
The savings will be applied to future debt service for the town’s water, wastewater and general funds. The original bonds sold in 2007 were applied to a variety of uses including improvements at the Public Safety Building, the wastewater plant, street paving and Northside Park restrooms and press boxes, for example. Bennett said the number of bidders showed the finance industry’s confidence in the resort.
“The fact we were able to get seven very competitive bids speaks to the town’s position in the market,” she said. “We should save $55,000 in the general fund next year just in interest costs.”
Bennett said a similar refunding of current bonds was not likely, but Ocean City should be able to take advantage in the next bond cycle.
“Our next bond goes out to bid next month for the $5.5 million radio contract,” she said. “We could expect to get a very favorable interest rate on those based on this bidding process.”
