RE: BOND REFUNDING NETS TAXPAYER SAVINGS
Making sure every dollar you entrust with us is stretched as far as it can go has never been more important than now, when we and school districts across the state face growing economic challenges. That’s exactly what we attempted to do with the refunding of our 2008 bonds, which resulted in an interest cost reduction of $540,485 for taxpayers.
The low bid from JP Morgan Chase was the same rate that we would have expected to pay out on a public bond sale, but the private placement of the debt ended up being less expensive because we were able to avoid such costs as printing an official statement and obtaining an independent rating. The end result: the debt will be less expensive to pay off, increasing taxpayer savings.
Explaining the ins and outs of the bond refunding can be extremely dry stuff to the average district resident, but here are the major points of strategy: The debt being refunded had interest rates between 4 and 4.125 percent being paid off by 2026. The new debt is structured so all those bonds carry an interest rate of 1.69 percent through 2026.
- That will allow the district to keep interest payments low and allow for the issuance of additional bonds without increasing the millage rate as time goes by. That’s preferable to a more typical arrangement that has lower interest rates in the near term and higher interest rates over time, which is how publicly sold bonds are typically priced. Now the district will have room to issue more debt without raising the millage rate.
- Because the district has a summer tax levy, we moved the principal payments to November 1 rather the typical date of May 1. The summer tax allows us to pay the principal on Nov. 1 instead of waiting six months, reducing the interest paid on the bonds and allowing for some greater savings.
Ensuring that our children receive the best education possible, so they can be college, career and life ready, involves many different facets beyond just what they learn in the classroom and we try our hardest to keep our finger on the pulse of them all. So, as we monitor such brick and mortar projects as completing the 2014 bond projects, and such fundamental tasks as assuring our curriculum meets students’ needs, we also strive to make sure your tax dollars are being wisely spent through such means as the refunding of debt.
We hope that we have earned your trust so we can cooperatively step forward into assuring all students reach their full potential on their path toward being – as our motto says – college, career and life ready.
Thomas K. Martin
Superintendent of Schools
West Ottawa Public Schools