Final Round of Bonds Refinancing Could Save Schools $2M-Plus

The third round of refinancing of the outstanding bonds mostly left from a $51-million major schools reconstruction project in 2004 could save the school district $2 million or more, a bond adviser said before the Bernards Board of Education on Monday night approved the financial arrangement.

The district already had reduced its interest payments by about $3.3 million in two previous rounds of bonds refinancing during the past year or so.

On Monday, Mary Lyons of Phoenix Advisors said that by reissuing up to $27,250,000 worth of outstanding bonds, now paying about 4 percent interest, the school district might save up to $2.3 million in interest payments, spread out over a 10-year-period.

Lyons said the bonds likely wouldn't be refinanced until September, and the deal likely wouldn't go through unless the new bonds would carry a rate of below 3 percent.

Lyons said Phoenix Advisors doesn't feel that interest rates will rise by September.

No matter what, school board member William Koch reported in February that the refinancing of about $24 million bonds at that time would save the district an average of almost $168,000 per year, for a total of $2.5 million in lower interest payments.

Koch said the second round of refinancing was for more than $24 million worth of bonds due to be paid off in 2030.

The net interest cost of bonds sold in February was a slight fraction under 2.8 percent, Koch said at that time. During the refinancing process, the district learned it has a double A bond rating, Koch said at last week's school board meeting.

That savings would be on top of about another $797,000 that the school district had saved by refinancing about $8.4 million during 2012, Rod McLaughlin, business administrator for the school distinct, said in January. 

The Board of Education had approved the refinancing of the entire amount of outstanding bonds in 2012. But school officials were not able to refinance all of the bonds in 2012 because of multiple restrictions.

"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.