The Overton Power District Board of Trustees voted to use a portion of the district’s reserve funds to pay down a significant part of its debt.
At a meeting held Wednesday August 15 in Mesquite, NV, board members considered action on two of the district’s loans which are scheduled for repricing in October of this year. The loans, each one in the amount of roughly $3.5 million, bear a current interest rate of 6.23 percent. The annual interest cost of this portion of the district’s debt is currently at just over $200,000 per loan.
The October 1 repricing offers the opportunity for the loans to be adjusted to a significantly lower interest rate on the debt. As of last week, market interest rates on the loans stood at 4.9 percent. While that rate changes almost daily with the market, district officials projected that, when the time comes to reprice, rates will still be at around 5 percent.
The loans also carry the option of locking in a rate as early as September 1.
But board members also discussed a second option: to pay down a portion of this debt. Operating with a healthy margin over the past two years, the district has been able to build up its cash reserves during that time. This cash was being held in reserve for use on upcoming capital improvement projects and to eventually pay down a portion of the district’s debt.
After some board discussion, trustees decided to use $3.5 million of district reserves to pay off one of the two loans. District staff was instructed to reprice the other loan in September at the current lower rate.
“I think that we owe that to our customers,” said Mesquite trustee Mike Young, who made the motion to approve the action. “Considering how much cash we have on hand, it would be a relatively small paydown. Otherwise we are just paying high rates when we don’t need to and getting nothing for the money.”
Bunkerville board member Robert Bunker agreed. “I’d like to see us use our cash to pay the debt down,” he said. “Even if it is just a portion.”