School district looks at refinancing bonds

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The Denton school district will look to save at least $1.5 million by refinancing a portion of its bonds at a lower interest rate.

The district’s finance officials are watching the market to secure a better interest rate after the school board authorized its Series 2004 and 2005-C Bonds to be refinanced if certain parameters are met.

In order to refinance, the district must do so before Feb. 1, must save at least $1.5 million, must not issue refunding bonds of more than $25.03 million and must secure an interest rate of 2 percent or lower.

Those refunding bonds must mature by Aug. 15, 2025.

Bill Gumbert, the district’s finance adviser from BOSC Inc., said that by federal law the district would have to use taxable bonds to lock in a lower interest rate.

He said that in the last seven years, the district has generated more than $30.4 million in savings through refinancing bonds at a lower interest rate.

In a letter to administrators, Gumbert reported that the Series 2004 bond is currently financed at a 5 percent interest rate with a principal amount to be refunded at $270,000, while the Series 2005-C has a current interest rate of 4.96 percent with a principal amount of $24.76 million to be refunded.

District officials say long-term interest rates have been low the last few months. Based on current market conditions, the interest rate on the bonds equals 1.86 percent, Gumbert said. Assuming interest rates remain unchanged at the time of the refinance, the district could save more than $1.9 million, Gumbert told the board last week.

Board President Mia Price called the potential refinance good news.

While the refinance will not impact the day-to-day maintenance and operations fund, it will impact the bond debt fund, known as interest and sinking. That will allow the district “a little bit more debt capacity for building new schools without raising taxes,” Price said. The district’s interest and sinking property tax rate is currently at 49 cents per $100 valuation, 1 cent short of the 50 cent cap.

“That’s significant,” Price said of the potential refinance. “It’s very important for this board to be cognizant of our bond indebtedness and to do all we can to reduce interest payments and to save money for the district.”

BRITNEY TABOR can be reached at 940-566-6876. Her e-mail address is btabor@dentonrc.com .

 


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