SAUGUS — The Board of Selectmen unanimously voted for the approval of a $1.5 million bond-anticipation note on Tuesday night.
Finance Director and Treasurer/Collector Wendy Hatch said the bond-anticipation note that was previously issued the same time last year needed to be renewed.
The bond was originally issued for the purchase of police cruisers and for building improvements to town-owned buildings, which were needed to comply with COVID-19 protocols.
“The town is still awaiting approval on the expenditures that have been submitted due to COVID, therefore we need to renew the span for an additional one year,” said Hatch.
She said the bond will be paid back once COVID expenses are approved. If any additional items need to be borrowed at that time next year, they will be “wrapped in as a permanent long-term bond.”
Selectman Jeffrey Cicolini made a motion to approve the sale of a $1.5 million, 1.86 percent general-obligation bond to Newburyport Five Cents Saving Bank.
Hatch said interest rates have been on the rise since last year, when the town issued this bond at an interest rate of less than 1 percent.
The town took three bids, and the winning one from Newburyport Five Cents Savings Bank in addition to a net interest cost of 1.86 percent, includes interest of $27,745 due upon maturity next May.
The second bidder was Piper Sander and Co., with a net interest cost of 2.31 percent, a premium of $10,245 and interest due of $44,750.
The third bidder, Oppenheimer & Co., offered a net interest cost of 2.38 percent, a premium of $5,416 and interest due of $41,020.
Cicolini said that it was becoming more and more difficult for banks to commit to the bond-anticipation notes, given the interest-rate environment, and that, to his knowledge “they were coming in somewhere between 3 percent and 4 percent,” and it was unbelievable to get 1.86 percent.
“That stuck out when I read the quotes that came in from a small-town bank like Newburyport putting in on bid and being the lowest bidder,” said Selectman Michael Serino.
Hatch said Newburyport was a surprise choice and noted that the current financial environment has resulted in a lot of money on deposit paid by the federal government at a time when people are not taking out loans.
“Quite frankly it’s because they have too much money, and they need to borrow it out,” she said.
