Members of the Snowflake Unified School District Governing Board discussed debt overview and refunding of outstanding bonds during a special meeting held Oct. 28, then approved a resolution regarding the sale and issuance of refunding bonds in an effort to keep the district tax rate as level as possible.
“In an effort to do everything possible to keep tax rates as low as we possibly can, we’re recommending we approve this tonight,” said Superintendent Hollis Merrell. “We have a record of doing everything we can to keep tax rates as low as we can.”
Mike LaVallee, managing director of Stifel, spoke to the board about refunding/refinancing bonds. LaVallee represented the company that worked with the district prior to the bond election and explained that the same people are involved, but at a different headquarters.
“Municipal rates have come down over the last year or so, and treasury yields have stayed sort of low over the last year or so,” said LaVallee, explaining that municipal rates tend to follow treasury yields.
The $6.3 million project of 2003 can be called (paid early). The district is now paying a higher interest rate than it would if it issued new refunding bonds. The interest rate on this bond now ranges from four percent to 4.650 percent. “It makes sense to call right now,” said LaVallee.
The second bond is so many years away it doesn’t make sense to call it. The district purchased a Class B bond on April 8, 2009, for school improvements, a 2008 project. LaVallee explained that the maturity range won’t be in effect until 2020, so it is not subject to redemption prior to the maturity date.
LaVallee showed the board what the market looks like presently, but noted that it will fluctuate. They will probably lock in the rates in late November and could have a minimum savings threshold of 2.5 percent. The decision to proceed will be made at the time they lock in the rate.
LaVallee also discussed options for passing that savings on to the taxpayers. One option is for the district to take all of the savings the first year, which would drop the tax rate for a year, but then increase again the following year. Another is to wait until the last year and take the savings. “Most clients want more level savings,” said LaVallee, and take the savings over the term of the debt.
Following discussion, board member Cory Johnson moved to adopt a resolution providing for all matters related to the refunding of certain bonds of the district by the sale and issuance of refunding bonds of the district, including delegation to the superintendent and the business manager of the district to determine certain matters related thereto, and directed staff to keep the tax rate as level as possible. The motion passed unanimously.
