MANALAPAN — Receiving an exceptionally low interest rate of 1.45 percent, township officials have announced that the municipality has sold approximately $6.5 million of its bond anticipation notes to Fleet Bank.
"Due to the township’s excellent credit rating, the township received proposals to purchase the notes from eight financial institutions," said James Devereaux, business administrator. "The proposals ranged from 1.45 percent to 2.53 percent."
Phil Del Turco, Manalapan’s chief financial officer, explained that it was more like refinancing a short-term borrowing.
"We received an excellent interest rate," he said. "You can’t ask for anything better."
The award of the notes was made to Fleet Bank, which made the low proposal of 1.45 percent. The township sold those notes to provide funds to finance capital improvement projects such as road improvements, parks and recreation improvements and purchase of equipment, according to municipal officials. Projects included in this financing were authorized from 1996 through 2002, with more than $4 million going toward projects authorized prior to this year.
According to a press release provided by the business administrator, the township’s strategy for financing capital projects relies upon the use of bond anticipation notes, which are short-term debt instruments, vs. the use of longer-term bonds. The township’s debt management strategy is to pay off all debt over a 10-year period rather than following the more conventional method of paying off large projects over a longer period of time. The township has chosen this strategy to take advantage of lower interest costs, as well as to reduce typical costs associated with issuing longer-term debt, according to the press release.
"Put simply, it has never been cheaper to go the 10-year route vs. a longer term," Devereaux said. "Manalapan is able to take advantage of this strategy because of its outstanding credit rating."
Del Turco agreed, saying, "A couple of things impact that. First there are the general market conditions, and the other impact would be your credit worthiness. The same things apply here."
Additionally, it was noted that the township had significantly reduced its level of debt and its principal and interest payments over recent years.
"While interest rates are most certainly at historic lows, there is no question that Manalapan has received this superior interest rate of 1.45 percent because of its solid financial condition," Devereaux said.
— Dave Benjamin