Municipal officials are issuing bonds to refinance $37 million in debt incurred over the past decade and half for sewer repairs, park improvements, and severance liabilities.
Bond counsel Timothy Cunningham on Tuesday said the city will likely secure an interest rate of under 2 percent by going through the Passaic County Improvement Authority, which has an Aa1 credit rating, second highest in the Moody’s ranking scale.
Paterson’s credit rating is below investment grade. Cunningham said if the city tried to refinance the bonds without going through the county it could expect interest rates of 6 to 6.5 percent because of its poor credit rating.
“If we issue them on our own it’s going to cost the taxpayers of the city a lot of money,” said council president Flavio Rivera, chairman of the finance committee, last week. “The interest rate is historically low.”
Cunningham described the interest rate as “extraordinarily low.” He said the city will save $3.27 million by using the county’s credit rating.
The refinancing measure covers borrowings that were done from 2005 through 2019. Majority of the borrowings, $21.3 million, were done for sewer repair projects, according to municipal records. Rest were borrowed for parks, public works equipment, severance pay for public safety employees, and other capital projects.
“I hope this is not an issue. This will save the taxpayers money,” said councilman Al Abdelaziz last week.
But it was an issue for councilman Michael Jackson on Tuesday night. He said the council is rushing to approve the measure. He accused Rivera of filling the 2nd Ward vacancy to rush the measure through.
The borrowing measure required a super majority or six votes for approval.
Council members approved the measure in a 7-1 vote. Abdelaziz, Gilman Choudhury, Lilisa Mimms, Luis Velez, Ruby Cotton, Maritza Davila, and Rivera voted in favor while Jackson voted against.
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