Bernards Schools Expect to Save Millions By Refinancing
Planned refinancing of debt from 2005 bond issuance expected to save between $2 to $3-million, along with previous savings.
The Bernards Township school district's bond counsel gave a brief report on Monday that outlined how township schools expects to save about $2.7 million — or $185,000 per year — by refinancing bonds still outstanding from the last major school reconstruction project in 2005.
That savings would be on top of about another $797,000 that the school district had saved by refinancing another $8.4 million during 2012, said Rod McLaughlin, business administrator for the school distict. The bonds being refinanced cover the school district's share of a $51 million schools construction project in 2005, according to figures from school officials.
This latest round, with $24,385,000 worth of bonds, would cover the remainder of the school district's outstanding debt from that project, Lisa Gorab, bond counsel for the Bernards Township school district, said at Monday's Board of Education meeting.
On Monday, Gorab said that the bond market had been even more favorable in November, the last time the refinancing was discussed with school officials. However, she said rates had risen slightly because of the "fiscal cliff" dispute at the federal level prior to New Year's.
Board Member William Koch said the district's investment counselors would look not only at rates but at whether the bonds could find buyers on the market.
Both Koch and Gorab said anticipated savings for the 2013 refinancing had been initially calculated at about $2.7 million over the remainder of the life of the $24.4-million bond issuance, which Koch said are due to be paid off in 2030.
However, both said the savings may be slightly less now in the current market.
The Board of Education had approved the refinancing of the entire amount of outstanding bonds in 2012. However, school officials said they wanted to reaffirm their intention before the remainder of the bonds are put on the market for refinancing.
Koch pointed out that one board member had not been part of last year's vote. The school board also reorganized in January.
School officials were not able to refinance all of the bonds in 2012.
"Since the first round was under $10 million it qualified for certain tax advantages to its purchasers and the seller [and] the Board of Education got a lower interest rate in return," McLaughlin explained. He said to receive that benefit, the board had to agree not to refund more than $10 million in the year that bonds were sold or issued under that provision. The initial $8.4 million worth of bonds refinanced in 2012 were sold with a 3 percent interest rate, according to his figure.
Koch said the school district looks for opportunities to reduce spending through such financial management. "It's a good savings for taxpayers," he noted.