The St. Michael-Albertville School District has been busy refinancing debt obligations over the past 1.5 years, and last week they approved a new refunding bond that will save $5.2 million for state and local taxpayers over the next 10 years.
Greg Crowe, municipal advisor for Ehlers, Inc., explained that a school building refunding bond is similar to refinancing a home, where the district can take advantage of lower interest rates to save taxpayers money and reduce their total debt obligation.
Crowe said the district’s A1 municipal bond rating helped the school district attract attention from seven different national underwriting firms for the $36 million dollar refunding, including J.P. Morgan, Raymond James, Merryl Lynch, Wells Fargo and others. In the end, Hutchinson, Shockey, Erley & Co. out of Chicago offered the best rates.
“We were anticipating an interest rate of about 2.33 percent and got 2.18 percent, which saves 10 percent more than anticipated,” Crowe said. The former interest rate for this bond was 4.29 percent.
Superintendent Jim Behle said taxes on future debt payments will go down starting in December, when the school district will set a lower levy amount than they had set as a preliminary number in September.
With a total of three bond refundings over the past 14 months, Crowe said the STMA school district has refinanced about $113 million of the school district’s debt and secured $14.25 million in future savings. Also, the board refinanced a capital bond in 2011 that saved the district $60 million, but most of the savings will be felt in 2030 and beyond.
“That’s a really good thing that you’ve done in terms of managing your debt and managing the tax impact that has on the taxpayers,” he said.
Despite all this, the STMA district remains one of the most heavily indebted school districts in the state of Minnesota, largely due to the three school buildings- Big Woods Elementary, Fieldstone Elementary and the new high school- constructed in quick succession during a time of rapid residential growth in St. Michael and Albertville. The district currently holds $160 million in total debt. Crowe said this high number was the main factor holding STMA back from a better credit rating, but said an A1 rating is still very attractive to potential bondholders.