Brandon Twp.-The district hopes to save taxpayers more than $7 million by obtaining a lower interest rate on bonds.
At their Sept. 21 meeting, the school board gave the go ahead to their financial adviser, RJ Naughton, and underwriter, Craig Taylor, to pursue selling bonds and obtaining the lowest interest rate possible on both the voter-approved 2006 bond, as well as the School Bond Loan Fund, money borrowed from the state to meet bond payments.
‘We are refinancing the bonds while interest rates are very good,? said Superintendent Matt Outlaw. ‘Refunding the bond is equivalent or similar to refinancing your mortgage to a lower rate… The interest rate is to be determined. We’ve given the green light to our financial adviser and underwriter to figure this out… It would be foolish to not do this.?
Voters passed a $72.9 million bond in 2006 which was used for several major renovations, including technology upgrades, construction of the new Oakwood Elementary School, and an activities complex.
The district seeks to refund $47,655,000 of that at an estimated interest rate of 3.440 percent. The district’s current interest rate on the bond is 4.606 percent. The new interest rate is estimated to save the district $4,289,487 on this bond, with a SBLF cost avoidance of $460,793.
Refunding of the School Bond Loan Fund, to which the district currently owes $47,237,674 at a 3.440 percent interest rate, could result in a new interest rate of 2.440 percent and a savings of $2,860,198 for a total projected interest savings on both bonds of $7,610,478.
The district currently levies 13 mills for the School Bond Loan Fund as a result of Public Act 437, passed in 2012 by the state legislature. The bill helps the state improve its bond rating and shortens the timeframe that districts have to repay loans, but caused a massive jump in tax bills here, where 8 mills was previously levied for repayment of school bonds.
Refunding of the bonds may result in a lower levy.
‘By doing this, we are going to be in compliance with PA 437, that says we have to pay off by 2032, prior, we would not be in compliance (even with the maximum levy),? said Jan Meek, executive director of business services for the district. ‘It’s going to pay this off a couple years sooner. In the long run, over the course of the next 17 years, the debt levy will go down slightly. We’re hoping to get at least a one mill reduction in the debt levy within the next couple years.?