BRITT | The West Hancock School Board is moving forward with a financial process that will save the district nearly $300,000 over the next eight years.
During a special meeting Monday, Oct. 2, the School Board in a 5-0 vote, with Leah Deutsch and Jon Harle absent, voted to refinance about $1.8 million remaining in its local option sales tax bonds used to fund the 2009 geothermal project at the High School.
“When people in the community are upset with the board and think that you never do anything right or you don’t do anything in favor of the taxpayer that’s just not true,” said Matt Gillaspie, managing director of public finance investment banking with Piper Jaffray in Des Moines, praising the School Board. “You’ve been doing good things, and you’ve been saving your patrons hundreds of thousands of dollars. If they don’t know it, I think they should know it.”
The school board’s decision came after a conference call with Gillaspie, who was on speaker phone as School Board members gathered in Superintendent Wayne Kronemann’s office.
The conference call followed Gillaspie’s review of nine bids from five financial institutions, including First State Bank in Britt, for the sale of the bonds received the week before.
After reviewing call dates and interest rates, Gillaspie recommended the sale of the bonds to BB&T Governmental Finance of Charlotte, North Carolina, for what Piper Jaffray believes is the “most reasonable proposal.”
The interest rate proposed by BB&T Governmental Finance is 2.11 percent — cutting the district’s previous 4.5 percent interest expense prior to the refinancing in half. The call date of the refinanced bonds is July 2020, and they will reach final maturity by July 2025, which is four years earlier than the original bond schedule.
Gillaspie said knowing the district’s history in paying off bonds early, he recommended BB&T Governmental Finance because it provided the district with the earliest call date, so if it wished to pay the debt off early, it could.
The School Board was able to shorten the bond maturity by shifting about $100,000 paid to the district’s general obligation bond, which will be paid off by 2020, to repaying the sales tax debt.
“It’s kind of equivalent to taking your 30-year mortgage and squeezing it into a 15-year mortgage,” Gillaspie said. “So the payments are higher, but we think you can afford them because you’re already affording the higher payment. It’s just that you’re dedicating that money to general obligation bonds.”
The district’s total savings for refinancing the bonds with BB&T Governmental Finance is $293,388.
In addition to refinancing, the district will advance refund the prior 2009 bonds, which can’t be paid off before their July 2019 call date but can be refinanced, with the establishment of an escrow. The escrow, which was established with the refinanced bond, will pay the old bonds until July 2019.
Gillaspie said the School Board’s actions up until Monday’s meeting, including using its surplus money to pay down the district’s general obligation bonds, has saved property taxpayers more than $580,000. With Monday’s action, the district has saved nearly $900,000.
“Good job, team,” said School Board President Ryan Anderson.
Mona Buns, School Board secretary, said the district considered refinancing the 2009 bonds last fall but due to the presidential election decided to postpone it.
In September, the School Board executed an engagement letter with Piper Jaffray to begin the refinancing process of the local option sales tax bonds to take advantage of lower interest rates.