KNIGHTDALE — Town Council agreed last week to finance $3 million in parks and recreation bonds through SunTrust Bank at an interest rate of 1.97 percent over 15 years.
Knightdale voters in November overwhelmingly supported a bond referendum to help complete phase two of Knightdale Station – a 70-acre park scheduled to open later this summer on First Avenue – and pay for the loan with a 2-cent property tax rate increase.
At the June 3 town council meeting, Knightdale staff presented the results of a private auction in which the town had approached eight local banks. Only SunTrust and BB&T bid on the bonds. SunTrust’s bid came in about $600,000 cheaper than BB&T’s offer to finance the bonds over 15 years at a 2.56 percent interest rate.
The agreement with SunTrust will cost Knightdale $3.47 million after 15 years, but could cost more if the town opts to pay the sum before then and incur the prepayment penalty.
“With interest rates this low, why would you ever want to pay it off early,” James Overton, Knightdale’s finance director, said during the June 3 Town Council meeting.
Knightdale town councilmen grinned and shook their heads as Overton read the bid details.
“Wow ... That’s a no brainer, “ Knightdale Mayor Russell Killen said of the SunTrust bid. “(This is) pretty cheap money, folks.”
The SunTrust interest rate is “cheaper than the inflation rate. It’s insane,” said Jeff Eddins, Knightdale town councilman and branch manager for First Citizens Bank. “What that translates to is a very generous savings to taxpayers they’ll see five to 10 years from now.”
SunTrust also put in the low-bid for financing the first phase of the forthcoming park. In 2011, SunTrust agreed to loan Knightdale $5 million with an interest rate of 2.33 percent over 15 years.
Knightdale’s bond sale is just the latest in a string of deals the town has executed to capitalize on low interest rates.
Last November, Knightdale saved an estimated $710,000 when it refinanced a loan on its Public Safety Building, reducing the interest rate on a $2.1 million loan to 2.3 percent from 4.1 percent.
Last May, the town saved an estimated $80,000 by refinancing $2.1 million in bonds sold in 2002, reducing the interest rate to 2.27 percent from 4 percent.