High School Bond Refunding Could Save the District $691K

The Windham School Board discussed a possible strategy last week of "refunding" or refinancing the 2005 bonds for Windham High School.

School Business Administrator Adam Steel called the issue one of the more complicated ones facing the district, explaining that the idea would be to pay off the old bonds and sell new bonds at a low interest rate.

"Interest rates right now are still historically low," he said.

Steel said that there is a call feature in the 2005 bonds that allows the district to refund them. The process does not require voter approval, he said.

"Right now, the bottom line, if we were to refund the bonds today, (the) estimated net savings (would be) $691,000,"

Steel said that the outstanding bonds have interest rates between 4 percent and 4.25 percent.

The current market rate for interest rates lies between 0.45 percent and 2.7 percent.

Steel said that shorter bonds would run near the 0.45 percent figure, and the longer the district goes out the closer the interest rate nears 2.7 percent.

The 2005 bond sale for the high school totaled just over $42 million.

Steel explained how the refunding process would work.

"The bonds we have are not allowed to be refunded before 2015," said Steel. "There is an escrow account set up that puts our old money from the new bond proceeds into that escrow and takes care of the existing bonds until 2015."

The district would then start paying off the new bonds in 2015.

Should the School Board say 'yes' to the idea, there would be a wait time between three and five months before the whole package can be put together and the district signs on the dotted line.

If the bonds are refunded, the district also doesn't have to use the same term of maturity.

"We can refund bonds and sell new bonds that also mature at the same time, or we can do things creatively," said Steel. "If the board wishes to, you could extend the bonds out to a maximum of 30 years to the date of issue, so you could tack on another 10 years (from the current bonds), but the longer the maturity, the higher the interest rate as well. But you have that option."

Board member Dennis Senibaldi said that he isn't interested in going past the current 2026 maturity date.

According to Steel, the only fees he expects up front would come if the district's bond council does any sort of analysis ahead of time. Steel estimated a cost of a few thousand dollars for that analysis.

Steel said that the genesis of the discussion came from an underwriter who "ran the numbers" on the publicly listed bonds.

The person would have a fiduciary relationship with the school district, but would only get paid if Windham goes through with the refunding.