Montgomery County, PA

 

NORRISTOWN — The Montgomery County Commissioners entered into a complex financing arrangement Thursday that is expected to generate $1.8 million in savings.

 

“This is going to generate $1 million in real savings to the County this year, which will help us reach our goal of reducing taxes again next year,” Montgomery County Commissioners’ Chairman Thomas Jay Ellis said.
 
The Commissioners are entering into interest rate swaps on $62.7 million in general obligation bonds that were issued in 2006 to take advantage of favorable conditions available in the tax-exempt bond market.

 

The Commissioners captured the interest savings today by entering into what is called a “swap transaction” with the Philadelphia investment banking firm of PNC Capital Markets.  The result was a $1 million up front savings and an anticipated savings of $880,000 over the next 24 years.

 

Local governments in Pennsylvania were granted the authority to enter into swap transactions such as this in 2003, said Ellis, who arranged the transaction.

 

This is the fifth time that the County has been able to take advantage of the new law. The Commissioners closed a $5 million budget gap using a “swaption” refinancing in December of 2003.

 

They used it again in July 2004 when they borrowed $60 million for Open Space preservation and $27.5 million for capital projects and generated $8.5 million in savings for taxpayers over the 20-year life of the loans.

 

It was used a third time in June 2005 to generate $3 million by refinancing $37.275 million in debt.

 

PFM is serving as swap advisors to the County for this transaction. Buchanan Ingersoll & Rooney is serving as swap counsel.