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Bond refinancing saves school district $428,000
(by Tony Lange - July 11, 2012)
Bond refinancing saves school district $428,000
By TONY LANGE
The Solon School District refinanced $3.55 million in outstanding bonds June 21, an action that saves the district $428,417, or 11 percent, during a 10-year maturation period that expires in 2023.
The bonds sold in less than two hours on the open market.
"It was a great day," district Treasurer Timothy Pickana said. "We recognized approximately a half a year ago, as we continue to look at our debt portfolio, we noticed that there were some bonds that were callable, which means we were able to refinance those, and there was a significant savings that we could possibly realize."
The refinancing was unanimously approved by the Solon School Board at its Feb. 27 regular meeting. It pertains to a debt issuance from 2003, which was approved by the taxpayers and had an initial value at $6 million.
Typically, if there is a potential savings in the 3 percent to 4 percent range, guidelines recommend refinancing and putting bonds back on the market at lower interest rates, Mr. Pickana said.
The original estimate for the refinancing savings was in the 8 percent to 9 percent range, or around $350,000, but, because of market conditions, taxpayers realized a greater savings, he said.
"It was a great opportunity to save these dollars for our community," Mr. Pickana said. "Anything we can do to help reduce the tax liability of our taxpayers is the right thing to do, and so we're taking advantage of that opportunity."
The successful bond refinance and sale was possible in large part to the bond-rating affirmations the district received just prior to the sale, he said. Both Moody's Investors Service and Fitch Rating Service issued positive reports that maintained the district's current ratings.
Solon is rated AAA by Fitch, which is the highest, and Aa1 by Moody's, which is one notch below the highest rating of Aaa. Only 10 districts in Ohio have an Aaa rating, while 18 have the Aa1 rating. Moody's rates about 250 districts statewide.
"The ratings affirmations are a strong endorsement from the financial community of the sound education and fiscal operations in the Solon schools and the stability of our community," Mr. Pickana said. "The rating process is very thorough, and the rating services scrutinize the district's finances and five-year forecast. Maintaining our excellent financial ratings from Moody's and Fitch demonstrates the district's credit worthiness due to sound fiscal practices."
The Solon School District's key rating drivers are a stable and diverse economy, strong record of voter support, financial flexibility, strong, consistent management, low debt levels and excellent reputation, according to Fitch.
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