At its July 1 meeting, the Local Government Commission (LGC) passed three resolutions that will allow local governments to more quickly refinance existing debt, a process known as “refunding.” The resolutions apply to the following debt types:
Previously, a unit of local government was required to have its proposed refunding voted on at a meeting of the LGC. Due to the inherent volatility of interest rates, waiting for the LGC’s approval meant that units at times may have missed the opportunity to obtain a lower interest rate on debt. The LGC's new approval resolutions allow units to refund debt without requiring additional LGC approval so long as:
- The refunding issue is for savings
- The maturity is not extended
- The amount borrowed is limited to amounts needed to refund the previous indebtedness plus costs of issuance
- The local unit has had proper fiscal management as evidenced by various factors
State Treasurer Brad Briner, who chairs the LGC, noted, "We are pleased to provide this added flexibility for local governments. Markets move quickly so this aims to allow access to markets when conditions are favorable rather than waiting for the LGC to act."
These changes mirror a resolution which was approved last month by the North Carolina Council of State at the request of Treasurer Briner. That resolution allows the Department of State Treasurer to refund certain state indebtedness more quickly than what was previously practiced.