King County sold two series of bonds this week, totaling $31.4 million, at near-zero interest rates.
“You can’t do much better than near-zero interest, and we can take advantage of these historically low rates thanks to our success in returning King County to sound financial footing,” said County Executive Dow Constantine.
Part of the bond proceeds will be used to fund relocation of Southeast District Court to the Maleng Regional Justice Center in Kent, and for several technology improvement projects that include upgrading the county’s telephone system, migrating from a mainframe to a modern computing environment, and making improvements to the County’s wide area computing network.
King County received 13 bids to purchase the first series of tax-exempt bonds totaling $25.4 million. The winning bid was from Fidelity Capital markets at an interest cost of 1.16 percent for bonds that mature in stages over the next 15 years. The County also received five bids to purchase a second series of taxable Qualified Energy Conservation Bonds (QECB) totaling $6 million. The winning bid was submitted by BMO Capital Markets. With these bonds, the federal government reimburses the County for nearly all of the interest costs, resulting in an interest rate of .03 percent for bonds that mature in ten years.
“Financing technology and energy projects at near zero interest rates means King County is saving money now and in the future,” said King County Councilmember Larry Phillips. “Ultra-low interest rates reduce project costs, and energy and technology upgrades may reduce King County’s future operating costs.”
The authority to issue QECB bonds stems from the American Recovery and Reinvestment Act (ARRA) of 2009. In today’s low interest rate environment, the County’s net obligation for the QECB bonds is essentially repaying the principal and ancillary issuance costs for improvements that generate energy savings of at least 20 percent over the life of the project. The bond funds will be used to replace and up-size sewage pumps at the Wastewater Treatment Division’s South Plant and to upgrade the heating, ventilation, and air conditioning systems in the King County Correctional Facility in downtown Seattle.
“By taking advantage of federal opportunities available through the Recovery and Reinvestment Act, low market interest rates, and the County’s excellent credit rating, we will be saving taxpayers millions of dollars while continuing to deliver on our promise of a more efficient, customer-focused County government,” said King County Councilmember Joe McDermott.
The favorable interest rates are due to a combination of historically low market interest rates, the County’s top level bonds ratings, and leveraging ARRA opportunities offered by the federal government. The top bond rating attracts financial investors and leads to the best possible interest pricing for bonds, which lowers the cost of borrowing for King County and its taxpayers.
