Refinancing school bonds to save Eagle County taxpayers $7M
May 19, 2013
EAGLE — The Eagle County School District will save taxpayers $7 million by refinancing its bond debt at lower interest rates.
The school board unanimously agreed Wednesday to give the plan the green light.
"With interest rates near all-time lows, there is an opportunity for the district to refund the Series 2007 Bonds for the purpose of providing savings to the district and its taxpayers," said Phil Onofrio, the school district's CFO.
How it works
In 2006, voters in the Eagle County School District gave the district permission to borrow $128,370,000 in general obligation bonds.
The district borrowed the money in January 2007. The money was used to replace Battle Mountain High School, remodel Eagle Valley High School, build June Creek Elementary School, build and acquire new technology infrastructure, buy land for schools and renovate and repair existing facilities.
The school district still owes $103,590,000 on those bonds.
The school district will borrow $104,540,000 to pay that off, which includes approximately $900,000 in fees and costs to refinance the debt.
Between 2007 and now, the interest rate on the bonds has dropped from 4.5 percent to 2.5 percent. That's where the $7 million savings comes from, Onofrio said.
The debt will be paid off in 2026. The average annual savings to taxpayers is $531,219.
The savings go directly to the taxpayers through slightly lower property taxes, not to the school district, said Kate Cocchiarela, school board member.
The school district has been looking at this for a year or two, since interest rates began dropping. When they were low enough, the school board decided to make the move, Onofrio said.
Large, institutional investors such as pension funds looking for rock solid investments, Onofrio said, will likely buy the bonds.
The interest is not taxable by the federal government, Onofrio said.
In meetings with the school board, representatives of the company issuing the new bonds, George K. Baum & Company, said it looks primarily at financial health and that the school board passed that test.
Company representatives said factors working in the school district's favor included:
• Strong financial management through the recession, with a general fund balance of $10.5 million, or approximately 20 percent of expenditures.
• Student enrollment increases of 6.68 percent from 6,007 in 2009 to 6,408 in 2013.
• Student enrollment average of 6,237 pupils during the past five years.
• A 25.3 percent population growth in Eagle County from 2000 to 2012.
• Unemployment in Eagle County in March was lower than the state's average of 7.3 percent and the national average of 7.6 percent.
• The school district's spending in was $2.4 million less in 2013-14 than in 2009-10, with 176 more students.
The school district plans to issue the new bonds on Thursday.
The bonds will be eligible for Colorado's Intercept Program. If the local economy completely collapses and the school district can't pay the bonds, the state treasurer will make the payments.