Schools look to refinance

Measure is projected to save the district $110,000 on its $3.9 million bond

— School board members voted, on Monday night, to begin the process of refinancing the Decatur School District’s $3.9 million bond for construction of the Northside Elementary School for a projected savings of $110,000.

Danny Lovelady, of First Security Beardsley Public Finance, held a special study session with the school board members before the meeting to explain the refunding process. Because the market is just beginning to climb from an all-time low last summer, refinancing the bonds is projected to lower the interest rate from 4.15 percent to 3.69 percent, Lovelady said.

The district will save $56,088 the first year, and the rest of the savings will be spread outover the life of the loan, he said. The money saved from the proposed refunding will have to be used for new construction, renovation or buying school equipment, Lovelady explained.

Refinancing fees of $114,265 have already been factored into the net savings, he said. The bond was originally issued in 2005 for the amount of $4.28 million and is set to be paid off in 2030.

Because the loan amount will not be increased and the loan term will not be lengthened, school board members can make the choice to issue the bonds without a vote from the public, Lovelady said.

The Arkansas Department of Education requires that refunding of bonds must save at least $100,000 or 5 percent of the loan. If the market changes before the legal requirementsof refunding the bond have been fulfilled and the savings are unattainable, the new bonds will not be issued, Lovelady said. However Beardsley Public Finance will have 24 months to continue looking for new bonds that would fit the parameters.

Another advantage to refunding the bond right now is the call time would be reduced from five years to two years, Lovelady said.

The call time is that period of time in which the bonds cannot be refunded or changed in any way. The standard call time is five years to give investors a guarantee on the return on their money, but because the market has been so low and has fluctuated so wildly, the call time has been reduced to two years in many cases, he said.

“It literally boils down to if you do this, you take advantage of the savings, and if you don’t you keep paying whatever you're paying,” Lovelady said.

The school board passed a motion to allow the school to apply for a permit to issue bonds from the Arkansas Department of Education, employ First Security Beardsley Public Finance as fiscal agent and authorize the superintendent of schools to accept or reject the best bid submitted inconnection with the sale of the proposed bonds.

News, Pages 1 on 11/17/2010