After the sale of two bonds at unusually low interest rates, it appears a recent upgrade to Morrisville’s credit rating might already be paying off.
Morrisville sold a 20-year bond Tuesday totaling about $10 million to fund construction of McCrimmon Parkway extension at an interest rate of 2.06 percent. The town will pay off that bond over a period of 20 years. Morrisville also refinanced some of its older debt the same day at a rate of 1.37 percent.
That lower-than-expected rate means Morrisville will owe less total interest – and fewer taxpayer dollars – than had been budgeted during the two decades Morrisville will be paying off this bond. That could free up money for other projects or partially offset higher-than-expected construction costs.
McCrimmon Parkway itself is expected to open sometime in 2018.
In preparing for these bond sales, Morrisville officials visited New York in early August to meet with the three major rating agencies – Moody’s, Standard & Poor’s and Fitch Rating. All three awarded Morrisville their highest possible ratings in reports delivered at the end of August.
Morrisville had previously held just two credit ratings. Standard & Poor had given the town its highest triple-A rating, while Moody’s assessment of the town’s creditworthiness had been a step below its top rating. This is the first time Fitch has assessed Morrisville’s credit.
“It’s important to note that they’re not telling us, ‘Yay for you!’ ” Town Manager Martha Paige said. “They’re assuring potential investors and potential bond-holders.”
With these new reports in hand, Morrisville’s bond sale Tuesday was surprisingly competitive, Paige said. Bidders on the town’s debt included large banks like Bank of America and Citigroup, but it was ultimately a smaller investment bank, Jeffries, whose low bid bought both the town’s new McCrimmon Parkway bond and its older debt at a lower interest rate. Bonds are usually sold to the bidder offering the lowest real interest rate.
“These are low rates,” Paige said. “We actually had people calling and congratulating us yesterday on our successful sale.”
Mayor Mark Stohlman credited the town’s latest rating to years of conservative budgeting, thorough management and consistent growth in the town’s surplus fund.
“They know we still have one of the lowest tax rates in Wake County, yet we’re still able to do these road projects and other operational investments,” Stohlman said. “I hope someone brought up the fact that we did a new census that enabled us to get more per-capita funding from the state and federal governments, because I’m sure they’d see that as sound finance.”
Paige suggested that other factors, like the overall growth and stability of Wake County and its municipalities, provided extra assurance that Morrisville was well-positioned to repay its debt.
The favorable interest rate will also free up some money toward the end of the decade. Morrisville had been prepared to scrape up against its debt ceiling in 2019, but Paige said those projections had assumed an interest rate higher than the one the town received Tuesday.
“Taxpayers are going to pay a lot less in interest,” Stohlman said. “And that’s good, because it helps offset the times when we finally get a bid in for a project and it’s higher than what we estimated.”
Gargan: 919-460-2604; @hgargan