Bank loan

‘Masters of our own destiny’: Shelton officials say $5m bank loan will save town money

SHELTON — The city is saving significant money by using banks rather than getting sureties to take out short-term loans, city officials say.

The Board of Aldermen, at its meeting last month, voted to approve borrowing just over $5 million from Newtown Savings Bank at a rate of 0.55% for a 5-year term. .

According to the city charter, aldermen can borrow 2% of the city budget each year, and Chief Financial Officer Paul Hiller said Mayor Mark Lauretti prefers short-term borrowing. The city charter requires aldermen’s bond loans to be paid within five years.

“This loan is one of the lowest rates a municipality has had in recent times,” Hiller said during an update from the council of aldermen’s finance committee on Tuesday. He said the rate “demonstrates the financial strength the city has achieved.”

Board Chairman John Anglace, Jr. confirmed Hiller’s assessment, saying the city chose to “shop around” for the best rate.

“We sat down and negotiated the best deal,” Anglace said. “We did much better than a 4% interest rate.”

In addition to the difference in interest rates, Anglace said that using a traditional bonding method – as used by many municipalities – comes with other costs, such as using an agent bonding, and the costs associated with obtaining credit reports from rating agencies such as Moody’s and S&P. Global, which can cost up to $30,000.

“(Lauretti) understood that,” Anglace said of the added costs and potentially higher interest rate when posting the bond. According to Anglace, Lauretti “said it was foolish to pass these significant administrative costs on to the taxpayer. Here, we are masters of our destiny.

Hiller said three years ago the city used the services of a bond broker to negotiate a loan with a bank. This agent cost the city approximately $23,000. In this case, the city did not go that route, opting instead for counsel from Newtown Savings Bank. The loan fee ended up being $3,350, he said.

“We didn’t have the administrative fee and we have a floor rate,” Hiller said.

Anglace asked rhetorically whether it was better to pay 0.5% or 3-5% on a $5 million loan.

“It’s huge. The money belongs to the taxpayers, so we have to be practical in managing people’s money,” he said. “We save a lot of money that way.”

The funds will be used to cover expenses approved for Alderman’s Bonding over the past two years. The package included clearances from fiscal years 2020, ’21, and ’22.

Among the more than 40 expenditures approved were $306,659 for the renovation of Shelton High tennis courts, $1.2 million for various road improvement projects, $150,000 for the purchase of two Grove Street properties and $252,000 for Bridgeport Magnet School tuition funding.

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