Steamboat School Board to look at refinancing $12.7 million in bonds
February 24, 2014
Steamboat Springs — The Steamboat Springs School District Board of Education will meet Wednesday morning to decide whether or not to refinance the district's 2004 and 2007 general obligation bonds, a move that could save taxpayers more than half a million dollars, according to Superintendent Brad Meeks.
Meeks and district Finance Director Dale Mellor are seeking board approval to refinance the bonds, which total about $12.7 million in combined issuances.
District financial adviser Dan O'Connell, of RBC Capital Markets, frequently checks market rates, Meeks said, and at a meeting a few weeks ago, O’Connell suggested the time was right to look into refinancing the two outstanding bonds.
"Dan is recommending we do it as soon as possible and not wait," Meeks said. "He is concerned the market might change and not be to our advantage.”
Meeks said the district had eyed refinancing during the summer but that six to eight months ago, it "wasn't feasible.”
"This is pretty typical of bond issuances," he said. "I equate it to refinancing your house, if we can refinance those bonds at a lower interest rate."
In a memo sent to Meeks and Mellor on Friday, O'Connell laid out the financial differences for the district should the bonds be refinanced as soon as possible. He said RBC Capital Markets can issue refunding bonds with an average interest rate of 1.83 percent.
At 1.83 percent, the 2004 bond interest rate would drop 2.57 percent from its current rate of 4.4 percent, or 257 basic points. The 2007 bond would drop 3.13 percent from its current 5 percent interest rate (317 basic points), O'Connell's memo stated.
The gross estimated savings would be approximately $554,631, O'Connell said, and he added the annual level savings scenario between 2014 and 2017 would approach the $100,000 mark, and about $50,000 between 2018 and 2020.
"It's a way for us to refinance the debt and hopefully save taxpayers a half-million or so," Meeks said. "It just makes sense to do it."
Meeks said O'Connell typically looks at thresholds and that the Government Finance Officers Association recommends refinancing bonds like Steamboat's when estimated savings are at 3 percent or better. The district, O'Connell said, would have estimated savings of 4.22 percent. "Well above the threshold," he added.
The 2004 and 2007 bonds are held by no single institution, Meeks said. Instead, a variety of institutions and investors hold the bonds.
The 2004 bonds were refunding bonds from 1997 bonds, which were used to remodel Steamboat Springs High School. The 2007 bond was used to replace Soda Creek Elementary School, as well as make an addition to Strawberry Park Elementary School.
Wednesday's meeting will begin at 8 a.m.