The county and city are poised to take advantage of current interest rates to save about $1.5 million on bonds issued in 1996 that funded construction of the new County-City Building and renovations of the old one into the Hall of Justice.

On Tuesday the Lancaster County Board approved an "advance refunding" of the bonds, which allows the Public Building Commission to issue up to $27 million in new bonds at a lower yield and hold the money in an escrow account until the current bonds can be called — or bought back by the city and county — in October 2006.

The move, which is similar to a refinance,  must still be approved by the City Council. Council members John Camp and Jonathan Cook, who were at Tuesday's Building Commission meeting, said they were confident the council would follow the County Board's lead.

State law allows local governments to refinance bonds multiple times to save money and get better terms. But the bonds can't be refinanced until they are callable, and the 1996 bonds aren't callable until next October.

The city and county could wait until that date and then look at refinancing, but, "I don't think anyone expects rates in October 2006 to be at the same level they are now," said Lauren Wismer, a local attorney who is the Building Commission's outside bond counsel.

By doing the advance refunding, which the Internal Revenue Service allows once, local government can take advantage of the low rates now and get guaranteed savings, he said.

The city and county will initially lose money on the deal, because the new bonds will yield about 4.3 percent but will only earn around 3 percent in the escrow account. The money will be invested in state and local government securities, said Scott Keene, a vice president with Ameritas Investment Corp., which will handle the sale of the bonds.

Keene said the bond issue must still be rated and then will hopefully be marketed in about three weeks. He said he expected the total offering to be for about $25.8 million.

The actual amount could be more or less depending on what rates are when the bonds are issued, Keene said.

"At this point we just hope rates hold for another three weeks or so," he said.

The savings from the refunding is projected at about $107,000 a year for the remaining 22-year duration of the bond issue. That works out to about $2.3 million, but  the issuance of the new bonds will cost about $300,000 and the city and county must pay a premium of about $475,000 when they call the bonds next year, Keene said. That will leave an overall savings of about $1.5 million.

State Fair match

In other business Wednesday, the board postponed a decision on  a resolution authorizing a one-time contribution of up to $27,000 to help Lincoln meet its requirement to match 10 percent of lottery funds received by the State Fair.

Since the board wants to use keno funds for the contribution, the county attorney's office recommended waiting a week and holding a public hearing before voting on the resolution.

Last week Mark Bowen, Mayor Colleen Seng's chief of staff, said he was told by the Department of Revenue that the first installment of the money, due by the end of the month, would be $534,760.

Reach Matt Olberding at 473-2647 or molberding@journalstar.com.