Berlin Council Agrees To Refinance Old Utility Bond

BERLIN – In spite of objections from Councilman Thom Gulyas, Berlin officials have agreed to refinance an electric utility bond.

At Monday’s council meeting, Gulyas suggested the town consider borrowing money from a local bank to pay off the bond instead of refinancing it. He said he had spoken to officials from the Bank of Ocean City and the company would be willing to provide a loan at a low rate.

Town staff, however, told council members the bond could not be prepaid and that if it was going to be refinanced it should be done now.

“We cannot go in and refinance whenever we want to,” said Natalie Saleh, the town’s finance director.

She explained that if the 2004 electric utility bond was refinanced, the rate would drop from 4.71 percent to 3.25 percent. That would mean savings of roughly $250,000 during the remaining 19 years of the bond.

“The interest rate’s going down and we are in a good position to refinance,” she said. “This will give us a better credit rating from the bond side and will save us money in the future.”

Gulyas had questions about the refinancing but had not been able to get more information.

“I was denied access to the information I requested a week ago,” he said. “I tried in vain to get the info I needed for this so I could run some ratios and projections myself. I could only go on what was given to me. “

Nevertheless, he approached the Bank of Ocean City to discuss the town’s options. He told the council he’d learned that the town could get a loan at a low interest rate — less than 3 percent — from the bank. He suggested that be used to pay off the electric utility bond. If the town did that, savings could exceed half a million dollars, according to Gulyas.

“Why aren’t we doing that?” he said.

Saleh said the bond did not have a prepayment allowance.

“We’re not allowed to prepay,” she said. “We have to continue with the program.”

When Gulyas asked if he could see documents that said that, Saleh said she would try to get him the entire bond packet. Gulyas suggested tabling the decision on the bond until then.

“It’s too much money to make that decision,” he said. “That’s why I requested the information last week.”

Mayor Gee Williams said Gulyas didn’t’ get it because he had asked for too much.

“The information you requested was quite detailed,” Williams said.

The mayor added that if Gulyas had simply asked for information about prepayment options on the bond he would have gotten it immediately. Instead, Gulyas wouldn’t say what he specifically wanted to know.

“That is not how we do business,” Williams said. “We don’t play ‘gotcha politics,’ that’s what you’re doing.”

Saleh said if the council didn’t agree to refinance the bond Monday it would be months before it could be done.

“We will lose the chance to enter the bond refinancing pool at this particular rate,” she said. “We’d probably have to wait another six months.”

The council voted 4-1, with Gulyas opposed, to move forward with refinancing the bond.