Board of Education to Save Taxpayers Millions in Debt Service

Community Unit School District 200 plans to refinance a portion of its debt after the Board of Education approved resolutions for refunding bonds and a required escrow agreement, allowing board members and staff to proceed with the process, according to a press release from the district.

Up to $15 million of the district's 2003 bonds are callable within the next 18 months. These bonds were issued to finance referendum-approved projects and to advance the refund of a portion of the district's outstanding debt and currently have an average interest rate between 5.2 and 5.25 percent. Current interest rates are around three percent.
 
At the March 14 Board of Education Meeting, the board voted to approve the parameters resolutions for refunding bonds and a required escrow agreement, allowing board members and staff to proceed with the refinancing process. Since the marketplace can change over time, the resolutions would include criteria that must be met in order for the process to move forward. The finance committee set a minimum present value savings of five percent in order to move forward. Any recommended resolutions will be provided to the board and all documents comply with the recommendations made by the board's finance committee. Therefore, the Executive Leadership, with direction from the Finance Committee, now has the latitude to refinance outstanding bonds at a time they deem appropriate- essentially when interest rates are at a low point, according to the release.

The finance committee has met over the past five months with representatives of PMA Securities, to review refinancing options and the use of the proceeds from the sale of the former Hubble school property.
 
Over the course of the past five months, the Board Finance Committee has met with representatives of PMA Securities to review refinancing options and the use of the Hubble proceeds. Based on the current interest rate environment, the Finance Committee is recommending that the Board of Education consider refinancing approximately $10 million of the 2003 Bonds. The $5 million in proceeds from the sale of the Hubble sale could then be used to payoff the remaining portion of the callable debt. This would save the owner of a $300,000 home approximately $212 over the next six years, according to the release.
 
While savings depend upon market conditions at the time of the refunding, estimated interest savings on a present value basis, including the use of the Hubble proceeds, is $1.2 million (actual interest reduction is estimated at $1.8 million. The debt service eliminated from the tax levy is estimated to be $6.8 million.
 
Andy Johnson, District 200 board and finance committee member, said in the statement that saving money is "always a good thing," and "very business-like.

"We promised the community we would be good stewards of our finances and this is another indicator of that good stewardship," said Johnson. "When we proposed the referendum for the new Hubble, we promised the community that we'd use proceeds from the sale of the 'old' Hubble to pay off some debt, and that is exactly what we're doing, plus more. Promises made, promises kept, money saved.”