School Bond Re-Fi Saves Taxpayers $1.1 Million
The sale, made during a period of record-low interest rates, officially closed December 13. It should save Collingswood taxpayers $60,000 annually from 2015 through 2030.
At its meeting Monday, the Collingswood Board of Education confirmed that a recent refunding sale of $15.6 million in bonds exceeded its financial expectations, and should net more than $1.1 million in savings to Collingswood taxpayers.
The rate reduction will take effect beginning in the 2015-16 school year, and will carry through the life of the bonds, which expire in 2030, said Beth Ann Coleman, business administrator for the district.
Better still: the move doesn’t extend the debt repayment schedule beyond its original date, and taxpayers will save about $60,000 annually from the move, Coleman said.
According to a press release issued by The Charleville Company of Robbinsville, NJ, the average net interest rate on the new bonds will be 2.6 percent, as compared with an original 4.2 percent average rate.
Charleville announced the total savings of the refinancing as $1,129,792.95. The sale was begun Nov. 30—a record-breaking day for low interest rates on the open market, it said in a press release—and was completed Dec. 13.
Charleville didn't miss an opportunity to take a jab at the borough credit rating in its announcement of the sale, either.
Its statement read that the sale was completed "after convincing Wall Street analysts and investors that what they had read about the Collingswood Borough did not apply to finances at the school district."
The board had been encouraged to secure its own credit rating when the proposal was first introduced publically at its October 2012 meeting.
“When you expect to have savings in excess of three percent, [the state] encourage[s] you to do it,” she said.
A move in the works for five years
Coleman said she'd been trying to refinance the debt since she first joined the district in 2007. At that time, she reached out to Phoenix Advisors, LLC, which eventually brokered the sale, and the bond attorney for the district “to see if the rates were good enough" to complete a refund.
("They weren’t,” she said.)
Coleman said that financial advisors to the district were “very conservative that we could save about $635,000 on the outstanding debt.” But then the district earned a credit rating that was two notches better than it had anticipated, effectively doubling its savings.
Coleman described the review process from Standard & Poor's as eminently thorough. It included an hour-long conversation with a liaison, during which, she said, “They turn over every rock.
“We sent them a lot of information,” Coleman said.
A week later, the district received a AA- bond rating, which Standard & Poor’s describes as the hallmark of a borrower with “very strong capacity to meet financial commitments.”
When that happened, “our advisors wanted to put the bonds to market as quickly as possible,” Coleman said.
“We got on the phone with the sellers and they were estimating $1.1 million in savings over the life of the bond, which was almost double what we anticipated,” she said.
That savings, by law, will be directly refunded to taxpayers in the district.
“It’s not like I can take that money and put it in my budget; it goes back to the taxpayers,” she said.
Good audits, shared services, spending freezes
The bonds were originally issued to cover the cost of construction undertaken from 2005-08, wherein the district built a corridor linking the high school and middle school, and added HVAC units to several school facilities.
They are the only debt the district carries, Coleman said.
“We’ve had very clean audits, very good audits for many years in a row,” she said.
Coleman credits planned savings and cost-control efforts—like shared service agreements, periodic spending freezes and the status of Collingswood as a receiving district—with helping the Board to avoid wild fluctuations in its finances from year to year.
“We’re not doing this spiking thing with taxes, one year we cut, one year we raise,” she said. “If there’s a cheaper way to do it, we’re trying to do it.”