Lake Zurich's strong credit rating should result in better-than-anticipated savings for taxpayers from a debt refinancing, officials said.
Village board trustees this week agreed to the refinancing for roughly $7.2 million in outstanding debt connected to a 2005 loan obtained through bond sales to investors. The money was used for capital improvements in a special taxing zone designed to encourage downtown redevelopment.
An initial projection in July showed Lake Zurich likely would save $300,000 to $360,000 in interest payments for the life of the loan through 2024. However, the savings are now expected to be greater, Finance Director Jodie Hartman said.
"We actually got better results and we're looking at about $400,000 in savings over the next 10 years," Hartman said.
Lake Zurich is expected to refinance the debt to an average annual interest rate of less than 2 percent. That would compare to interest rates of 3.75 percent to 4 percent paid by the village.
In January, a major rating house deemed Lake Zurich government as more credit worthy -- an achievement village officials said would result in a lower cost to taxpayers if the village needs to borrow money. Hartman said the top-notch rating led to the interest rate savings opportunity for the current debt.
Standard & Poor's this month reaffirmed its decision to elevate Lake Zurich from AA to its highest AAA long-term credit rating.
"It is a big deal," Hartman told the village board.
S&P credit analyst Caroline West said Lake Zurich's high rating "is supported by our view of the village's very strong economy, liquidity and budgetary flexibility."
Mayor Thomas Poynton touched on Lake Zurich's ability to keep S&P's top AAA credit rating before the village board voted to place a home-rule referendum question before voters Nov. 4. Home rule would allow Lake Zurich government more control over taxes and other issues.
"The money people think that this mayor, this board and this staff are financially responsible," Poynton said.
Money has been an issue in Lake Zurich because village government has roughly $28 million in outstanding debt associated with the long-stalled downtown redevelopment.