Board eyes refinancing portion of school bonds
A portion of the school bonds for the new Lansing Elementary School on West Mary Street could soon be up for sale, resulting in a potential savings of $343,000 to district taxpayers.
Greg Vahrenberg, managing director with the financial firm Piper Jaffray, presented a refinancing analysis to Lansing School Board members during the board's monthly meeting Monday, Feb. 12.
Vahrenberg told board members that a portion of the $23.6 million bond issue voters approved in April 2005 appeared to be a good candidate for refinancing.
The bonds, which were sold in May 2005, will pay for a new K-5 elementary school and an auditorium and band room at Lansing High School.
Vahrenberg said the portion ripe for refinancing totals $8.54 million in principal for the years 2024 to 2026.
"Each of those years has an interest rate of 5 percent, and that's currently higher than the interest rates that we're seeing in the marketplace today," he said.
Selling a portion of the bonds on the current market, Vahrenberg said, could drop the interest rate by as much as a full percentage point.
Vahrenberg told board members the bottom-line savings for district taxpayers would be noticeable but wouldn't extend the repayment schedule.
Lansing schools superintendent Randal Bagby told board members a savings would ultimately result in a decrease in the mill levy rate.
Based on today's market, Vahrenberg said, the refinancing would likely yield a potential debt service savings of between $17,000 and $18,000 per year to the district through the life of the bond issue. That equals about $343,663 through the year 2026, he said, based on current interest rates.
Board members approved a resolution, 7-0, authorizing Piper Jaffray to share information about a potential bond sale with possible investors. The resolution also authorizes board president Shelly Gowdy to sign off on the final interest rate should interest rates move in a favorable direction before the board's next monthly meeting March 12.
That action would allow Piper Jaffray to lock in a low interest rate but would still require the final approval of the board before the sale would be finalized, Vandenberg explained.
Board members responded favorably to the idea, so long as the district isn't penalized should board members ultimately decide against the sale.
"All of the cost of issuance and the bond insurance premiums are all contingent upon closing the bond issue. Closing the bond issue would be contingent upon the board reaching an acceptable level of savings :" Vahrenberg said. "Costs are only incurred when savings is an issue."
Gowdy told the board she appreciated the financial firm's proactive approach to saving the district money.
"In the time that I've been on the board, I can't remember a time when we've had bond council come to us looking for a way to save our taxpayers money," she said. "So I personally very much appreciate that."