Rehoboth Beach sells $18M in bonds
REHOBOTH BEACH — Rehoboth Beach city officials have sold up to $18 million in bonds, in a bid to take advantage of a lower interest rate and will speed up its repayment timeline, marking the first time in 40 years the city has gone to the bond market.
The Rehoboth Beach Board of Commissioners voted at the end of December to accept the bid of JPMorgan Chase Bank to underwrite financing for general obligation bonds, which promised a 1.61% interest rate over a 15-year period. It was one of five bids the city received.
The sale closed last week. The deal will reportedly save the city $1.85 million in repayments and shortens the repayment timeline by four years, according to city officials.
“This wasn’t a difficult decision,” Rehoboth Beach Finance Director Burt Dukes said in a prepared statement. “We’re able to pay off one of the city’s loans four years earlier at a substantially reduced rate, and we’re saving taxpayers money, somewhere in the neighborhood of $1.8 million.”
Rehoboth Beach has not gone to the bond market since the 1980s because of the attractive terms and low interest rates offered through state and federal funding programs, according to Dukes.
Income from the bonds will be used to pay off two existing loans the beachside city holds that represent a combined $17.32 million in debt from state-offered programs.
Breaking that down, that includes $15.42 million from a U.S. Department of Agriculture loan to back the construction of a new $20 million city hall that was completed in 2017. The interest rate was set at 2.375%
“At the time the city was considering [bonds] to fund construction of city hall in 2015, the terms and rates offered by USDA were attractive and preferable to a public issue of bonds,” Dukes told the Delaware Business Times. “However, rates have declined since then, encouraging the city to investigate the feasibility of refinancing at lower rates and improved terms.”
The second federal loan represents $1.9 million borrowed from the U.S. Environmental Protection Agency for rebuilding the Lynch well, which took years and $7 million to complete. Interest rate for the funding Rehoboth Beach bonded — as the state awarded the city a grant to complete the project — was 2.76%.