WATERVILLE — The city expects to save more than $800,000 over the next 20 years by refinancing a bond from 2002, City Manager Michael Roy said Friday.

The average annual savings will be $40,000 a year, he said.

That savings will be important as the city looks at borrowing next year for construction of a police station and fixing roads, he said.

The city borrowed $5.3 million in 2002 for a fire station construction project, for repairing and rebuilding streets and roads and for school athletic fields, Roy said. The bond interest rate was 4.8 percent.

It was a 30-year bond, and the city is refinancing the remaining $3.3 million of the bond for the next 20 years.

The city opened bids Thursday and accepted a low bid of 1.99 percent interest, he said.

The term and amount of the bond are the same, but the amount the city will pay changes, he said, adding that interest rates change over the years typically start out at a lower rate and end up much higher.

So the city will start out paying less than the 1.99 percent interest rate and that number will increase; but over the period of the bond, the average will be 1.99 percent.

The actual savings over the next 20 years is $883,000, but the cost to refinance the bond is $75,000, leaving a savings of $805,000, Roy said.

The bond is being refinanced Nov. 1. Dick Ranaghan, a public finance advisor with Gorham Savings Bank is coordinating the refinancing, Roy said.

Roy said the city will retire one bond next year, and the savings for that is $92,000. The city retired another bond this year, for a savings of $45,000.

The bonding agency, Standard & Poor, recently gave the city an A+ bond rating — the same as last year.

The city’s finance director, Chuck Calkins, said Friday that the rating came with an opinion that it is not expected to decline.

The city’s fund balance or surplus is expected to be around $8 million at the end of this year, according to Calkins.

Roy said the city’s financial management has been stable for the last 10 years and the surplus has grown.

In an email to city councilors, Roy commended both Calkins and Ranaghan for their work on the bond refinancing.

Meanwhile, a meeting to review bids for police station construction that was scheduled for Oct. 30 has been postponed until Nov. 1, according to Calkins.

The meeting, open to the public, is scheduled for 7 p.m. in the council chambers at The Center downtown.

Amy Calder — 861-9247

acalder@centralmaine.com