Bond refunding should ease School District 192 taxesThe Farmington School Board will refinance one of its outstanding bonds in the interest of saving residents some money on their tax bills. It will hold off on refinancing two others in hopes of saving more money down the line.
By: Nathan Hansen, The Farmington Independent
The Farmington School Board will refinance one of its outstanding bonds in the interest of saving residents some money on their tax bills. It will hold off on refinancing two others in hopes of saving more money down the line.
Financial advisor Joel Sutter of the firm Ehlers brought the three issues to school board members at a Monday night workshop. None of the bonds is eligible yet for a traditional refinancing, but all were eligible for advance refinancing, which lets districts take advantage of low interest rates when they occur but come with increased up-front costs.
With interest rates currently near the lowest they have been since 1967, Sutter thought it was worth at least considering refinancing for three specific bond issues.
Farmington has the third-highest tax burden among Minnesota school districts, Sutter said.
“When I say this is well-deserved savings for your taxpayers, I really mean it,” Sutter said.
The bonds the district will refinance were sold in 2005 to refinance an earlier bond sale from 1996. There is more than $17 million remaining for the district to repay, and Sutter estimated refinancing will save approximately $294,300 on next year’s tax bill, assuming the district completes the sale before it certifies its final tax levy. Annual savings amounts will be similar though 2020.
That decision was easy for board members to make. The other refinancings are a bit trickier. The district could save more than $9 million if it refinanced an $85 million bond sold to pay for the construction of the current Farmington High School building, but taxpayers would not see any savings for at least two years, and Sutter said the higher costs associated with acting now could be offset if the district waits and interest rates stay in the same ballpark. A later refinancing with interest rates nearly 1 percent higher would save the district roughly $16 million.
“If we knew rates were going to stay that low, it would be a no-brainer,” Sutter said.
Sutter did not make a recommendation on refinancing the $85 million bond. He left it up to board members to decide whether they wanted what he described as a bird in the hand, or whether they wanted to see whether there were two in the bush somewhere down the line.
Finance director Carl Colmark advised waiting, and that’s ultimately what board members chose to do. Board member Julie Singewald supported the plan but said she didn’t want the district to have a “knee jerk” reaction the first time interest rates started to rise.
“I don’t want us jumping,” she said.”
The final bond decision was more clear-cut, but in a different way than the first. In the case of the $24 million bonds Sutter recommended waiting. He said even with a 1.5 percent interest rate increase the district could save money by taking its time.