Dirt cheap money for Portland cop shop
The City of Portland sold nearly $22 million in bonds this week. A little over half of the borrowed dough will pay for the new police training center out by the airport, and the rest will refinance debt that the city's been paying on for a decade or more. The IOU's are backed by the city's property tax revenues. They were rated one notch below the top by Moody's, and interest received by the lenders is tax-exempt. The longest of the bonds is for a mere 10 years. As a result, the interest rates are quite low. As we understand it, the real interest rates are in the "Price or Yield" column:
The bonds sold at a premium, meaning that because on their face they pay interest at 3% or 4%, the bondholders paid more than face value for them -- in this case, a lot more. In all, the city got a little more than $24 million to play with.
Even at the low interest rates, the debt service will be substantial. By our calculations, the first year's interest alone will be more than $714,000. The up-front underwriter's commission and transaction costs come to $135,550.
| Posted at 11:48 AM | Permalink |
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Comments (6)
Gawd I love capitalism.
I just hope I'm still alive to watch the fun during the next ECONOMIC COLLAPSE
Posted by al m | May 18, 2012 12:11 PM
al m, you won't have to wait long, you just watched it beginning last Tuesday.
Posted by Old Shep | May 18, 2012 12:19 PM
Jack, do you have sources to determine the exact bond rates paid for SoWhat through the life of the URA since 1999? I know that some of the bonds have been disguised by PDC for the exact purposes they were to fund, making exact rates for a particular URA hard to decipher.
I know that for the past several years the average of SoWhat bonds have been in the 5% to 6% rate. I know if you asked the PDC this question they would say, "don't know", "hard to determine", "we'll get back to you" (maybe).
Posted by lw | May 18, 2012 12:53 PM
"Dirt cheap money"
Problem is, like Congress, instead of using cheap money to pay off debt, they just use to
spend more.
WHen interest rates turn, it'll be ugly
Posted by Steve | May 18, 2012 6:21 PM
Thank you Greece. Maybe by the time Spain takes a dive the rates will be negative. For the wildest ride, wait until something happens that causes money to flow out of the US.
Posted by Newleaf | May 19, 2012 6:22 AM
True cost to state is higher because the tax exemption comes out of income taxes and somebody (you and me) have to make up the difference.
Posted by Robert | May 19, 2012 9:15 AM