Tooele County School District will save $350,000 on bond payments over the next seven years, officials say.
The Tooele County School Board approved a resolution at their Feb. 11 meeting that allows district officials to bond for up to $15 million.
The new bonds, expected to be issued with an interest rate of around 1.75 percent, will replace $13.6 million in outstanding general obligation bonds issued in 2005 and 2006 that have interest rates between 4.25 and 5.0 percent, according to Alex Buxton, of Zions Bank Public Finance.
“We estimate the savings to be about $40,000 to $50,000 dollars a year with about seven years left,” he said. “We aren’t changing any other terms of the bonds. The length of time will remain the same. The new bonds will mature at the same time as the old bonds.”
The resolution sets the upper limit of the new bonds slightly higher than the balance of the old debt to cover the costs of refinancing, said Lark Reynolds, Tooele County School District business administrator.
The resolution sets parameters for the refinancing and authorizes Reynolds to make decisions on refinancing to allow the district to lock in the best interest rate.
Scott Rogers, Tooele County School District superintendent, compared the refinancing of old bonds with newer bonds at a lower interest rate to paying off high interest credit card debt with a low interest loan.
“Whenever we have the opportunity to refinance bonds in a market like we have now, we can save taxpayers’ money,” he said. “That is our responsibility to be vigilant and awake while steering the ship.”
General obligation bonds, which can only be issued with voter approval, carry the full faith and credit of the community, and are backed by property taxes and have a lower interest rate than other types of bonds.
The general obligation bonds being refinanced by the school district were originally issued for $18 million and $21 million in 2005 and 2006, and were used to finance the construction of Stansbury High School and Settlement Canyon Elementary.
The district’s bond rating is very good, according to Buxton.
Standard and Poor’s has rated the district at AA- and Moody’s has rated the district with an Aa3 rating.
School district general obligation bonds in Utah are backed by the full faith and credit of the state with a AAA bond rating, according to Buxton.
Standard and Poor’s and Moody’s are two major financial services firms that provide credit rating services. Credit ratings measure the potential risk of an investment and are often used to determine interest rates for bonds.
Rating agencies look over information provided by the bond issuer — including information on the project being funded, the revenue stream pledged to repay the bonds and financial information for the municipality — and issue a rating for the bond. Ratings are specific to the bond being issued.
To save money on getting new bond ratings the district may chose to sell the bonds directly on the private market instead of on the open public market, said Buxton.
“The resolution does not bind the district to sell the bonds,” he said. “We can do whatever saves the district the most money.”