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Bond Refinancing Could Save Taxpayers Millions in Debt Service

The District 194 Board of Education is considering refunding bonds, which could lower the district’s borrowing costs by more than $10 million over the next decade.

Lakeville school board members have an envious financial decision to make.

Next month, the District 194 Board of Education is expected to vote on whether to refinance a portion of the district’s $176 million of bond debt and save taxpayers more than $10 million over the next decade.

The question facing board members isn’t whether to refund the bonds. Rather, it’s how the refinancing should be structured.

One option is to provide taxpayers relief beginning with next year’s property tax statement. The other is to pay more of the principal on the debt sooner and reap more savings later.

Board members could vote on the issue as soon as its Sept. 11 regular meeting.

Restructuring the district’s debt was discussed at Tuesday night’s .

District 194 taxpayers are facing what could be described as a steep jump in debt service over the next decade, according to Ehlers Inc., a financial consultant for the district. The debt levy would increase from $15.9 million in the current budget year to $22 million in Fiscal Year 2022. The debt service then would drop to $13 million the following year.

The district now has the opportunity to refinance bonds issued in 2002 that funded the construction of and other capital projects.

Because of current near-historic low interest rates, Tom Berge of Ehlers said the district could save as much as 15 percent—what he said could be a record-high percentage—in repayment costs by refunding the old bonds now and and selling new bonds with lower borrowing costs.

The exact savings is determined by the interest rate at the time of the bond sale.

Berge said the district has options as to how to structure repayment of the new bonds. The first option is to reduce debt service right away, which would drop the debt levy by more than $1 million next year and save the district an estimated $10.47 million over the life of the bonds.

The second option is for the district to pay more of the principal on the lower-cost bonds now. That would save the district an estimated $10.558 million over the life of the bonds.

If the school board approved a refunding option at its Sept. 11 meeting, the new bonds could be sold as soon as Oct. 9 and the transaction would close a month later.

Berge said the district will have the opportunity to refund more of its debt in 2016.

CAT@COMCAST August 26, 2012 at 02:50 PM
I agree that this debt should be restructured to gain the full benefit of the current financial envoirment but my faith in this school board to do what's best is zero... I urge everyone that reads my post to tell ten people they know to vote for a new school board member in Novemember. I don't have an agenda but after watching this board over the past two years with their blunders it's time for new voices and ideas.

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