The Montana State Revolving Fund is letting municipal borrowers refinance their loans from the program at reduced interest rates. And that’s saving Kalispell and other cities around the state millions of dollars.

Kalispell was one of the first cities to push to refinance its revolving fund loans. The city asked to refinance five loans that were entered between 2001 and 2007, totaling $19.4 million, in a push to reduce its debt service costs at a time of record-low interest rates.

Unlike other state lending programs such as the Montana Board of Investments that offer variable rate loans that move up or down with benchmark rates, the Montana State Revolving Fund offers fixed-rate loans. Rates that looked attractive years ago don’t always look good today.

The refinancing will save Kalispell about $2.3 million over the life of its loans, with interest rates cut to 3 percent for 20-year debt, 2.25 percent for 15-year debt, 2 percent for 10-year debt and 1.25 percent for five- year debt, city officials said. 

Kalispell’s refinancing was undertaken along with a new $1.2 million revolving-fund loan to overhaul a primary digester tank at the city’s wastewater treatment plant. The city also plans to tap the revolving fund program to pay for stormwater drainage upgrades in the Willows subdivision — debt that will be paid off by homeowners through the creation of a special improvement district.

Other cities in Montana are following suit. Twenty-three municipalities have refinanced their loans with the state fund program and collectively saved more than $18 million.

“Interest rates came down, so a number of communities we have loans with were interested in refinancing,” said Anna Miller, financial adviser for the Montana Department of Natural Resources and Conservation. “We looked into it and the state’s borrowing costs had declined so we wanted to pass those savings on.”

Montana Department of Natural Resources and Conservation jointly administers the Montana State Revolving Fund with the state Department of Environmental Quality. It was capitalized with a mix of federal grants and state-issued general-obligation bonds and offers Montana municipalities loans for water and sewer projects with interest rates at or below market levels. The fund has a portfolio of about 400 loans and borrower payments provide money for loans for future infrastructure projects.

“Kalispell was interested in it, so we worked with them on doing it and they had a lot of savings. That was our guidance to start working with other communities on restructuring the rates,” Miller said, adding that the initiative remains a work in progress. 

Whitefish is among the other cities that have refinanced their revolving fund loans. It refinanced loans taken out for water and wastewater treatment plant upgrades and the refinancing is projected to save the city about $760,000, Finance Director Rich Knapp said.

“They needed to match the market because their rates were higher, so cities were being tempted to move their debt elsewhere,” Knapp said. “It just comes down to saving money. What I do know is this made it to where it wasn’t a good idea to go back to the private market. It was cheaper to stay with the state.”

Reporter Tom Lotshaw may be reached at 758-4483 or by email at tlotshaw@dailyinterlake.com.