The City of Bonney Lake may seek to lower the Justice Center’s tax burden with a refinance.

Construction of the then-interim Justice Center was funded by a $10 million limited tax general obligation bond, passed at the end of 2007 for issuance in 2008. The bonds were sold in $5,000 increments accruing between 3.15 and 5 percent interest per year. Underwriting the bonds was Martin Nelson & Co., represented by Jim Nelson.

Nelson, now with D.A. Davidson & Co., reunited with the Bonney Lake City Council Feb. 5 to sell the council on the idea of refinancing a portion of its bond debt to take advantage of lowered interest rates. The proposed refinance would apply only to maturities from 2020 to the final maturity date of 2032, lowering coupon interest rates from the presently scheduled 4.25-to-4.5 percent fluctuation to 2.5 percent, Nelson said.

“The structure we’re showing this evening is showing a total net savings of $392,000,” he said at the council workshop. “That’s a net-net savings with refinancing costs already deducted.”

Nelson’s division of the Davidson Companies specializes in public finance. The company has worked with east Pierce government organizations before, most recently in refinancing the Sumner School District’s bond debt for the “Promises Made, Promises Kept” campus reconstruction campaign.

Under the bond financing system, a public organization — in this case, a municipal government — raises funding for an expensive project by selling debt security to an underwriter under agreed terms of interest. The underwriter turns around and sells the debt to investors as bonds. The investors can hold on to the bonds to maturity or sell to other investors at a price based on confidence in the issuer’s financial health; presently, the City of Bonney Lake carries a high credit rating at “AA” under the Standard & Poors system.

The original organization is responsible for making the agreed payments each year but it’s ultimately said organization’s taxpayers who foot the bill, which is why public institutions seek out refinancing. Under federal law, taxpayers are the only group that can benefit from a bond reissue.

When bonds are refinanced, the bonds that have already been issued are bought back from their holders at their par value, and a new bond issuance is released to the market with the updated terms of interest.

On Friday, a resolution was placed on the agenda for the Feb. 26 council meeting to declare the city’s intent to reissue bonds.