School district could lower taxes, if market allows
July 21, 2010
By Laura Geggel
Thanks to the economy’s low interest rates, taxpayers could save a total of about $1.2 million, if the market cooperates.
In 2003, Snoqualmie Valley voters passed a $53.5 million bond that paid for a number of projects, including Cascade View Elementary School, Twin Falls Middle School, the expansion of the Chief Kanim Middle School gymnasium and a districtwide fiber optic system.
At the time, interest rates were about 5 percent. Now, with interest rates at about 3 percent, the school board approved a motion at its July 8 meeting that would allow the district to refinance its bonds and save taxpayers money.
“I feel these days I’m in the business of selling silver lining, because we’re hearing talk of higher unemployment, debt issues and a crisis in Europe,” D.A. Davidson & Co. Senior Vice President Jon Gores said. “That bad news is actually good news, because it’s bringing down interest rates.”
Gores and the school board agreed that the district would not refinance the bonds unless it had at least a 4 percent savings, meaning taxpayers would save at least $1.2 million over the life of the 20-year bond.
The $1.2 million does not include the roughly $240,000 the school district would have to spend to reissue the bonds.
If a window opens when the 4 percent savings can be achieved, D.A. Davidson & Co. associates will pay back the current bondholders and then resell the bonds at their new, low interest rate to new buyers. The taxpayers would see the decrease in the year following the refinance.
The bonds can only be refinanced once, so the district needs to have all of its papers ready if it wants to move ahead, Gores said.
“My mode is we really want to hurry up and wait,” Superintendent Joel Aune said at the June 24 school board meeting. “Let’s get it ready and then wait.”
The district cannot refinance all of its bonds, because it sold them in two sessions. During the first session, in 2003, the district sold $40 million worth of bonds. The district waited two years, until 2005, before selling the rest of the bonds, because as a tax-exempt entity, the district is required to spend all of its bond money within three years.
“Spending $53.5 million can be difficult in three years,” Gores said.
Of the $40 million in bonds that were sold in 2003, about $30 million of them can be refinanced, due to agreements with the bondholders.
Gores said the district’s taxpayers would benefit financially if the bond refunding were successful.
“The school district does not benefit in any way,” Gores said. “It’s strictly a benefit to the taxpayers. I think it illustrates that the district is a good steward with the taxpayers’ dollars.”
Laura Geggel: 392-6434, ext. 221, or lgeggel@snovalleystar.com. Comment at www.snovalleystar.com.
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