A decision could be made at Dec. 16 meeting
By Jana Benscoter
For the Daily Record/Sunday News Gordon Walker, managing director with Public Financial Management, presented Northeastern School Board members with an update recently as to how much they could save by financing some of the dis
The deal is called a swap. Swaps began in 2003 under Act 23. Director of Operations Brian Geller said there are different kinds of financing options in a swap.
The school district’s contract would task the authority to manage the district’s cash flow exchanges between a bond issuer and a bank, based on an agreed-upon term, and other securities and indices, Geller said.
Geller said the risk, which have caused other school districts, namely Elizabeth School District, to lose millions in taxpayers money, is not the same kind of swap they are interested in entering. Elizabeth used a variable rate. Former Auditor General Jack Wagner investigated swaps, and said he does not endorse them.
The district has been developing a financing method of its debt for several months. Rather than using a variable-rate loan, that had been broached but not been decided upon, Northeastern is considering using a fixed-rate loan.
This pending contract would be used to replace the 2009 bond issue with the same maturity date as the current 2009 bond issue of 2024. The district has $114 million in debt, including interest. The board is considering a loan for $6.665 million. The authority’s fee is $26,660.
The financing rate Walker presented to the board was 2.21 percent. The fixed-rate option is favored by the directors. Geller said the financing rate of the loan will most likely range between 2.5 percent
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and 3 percent.
Walker said the district would save $250,309 in 2014, and $128,554 in 2015. For the years 2016 to 2024, Walker said the district would “break even” in savings.
Walker said the authority, using the fixed-rate loan, allows the school district, in five years, to refinance if the fixed rate is lower than its current rate.
“Three percent is considered a good deal,” Walker said. He said the total savings following the loan would be 5.87 percent, or $379,697.
The board will consider passing a resolution Dec. 16 to borrow sufficient funds to refund the 2009 bonds. After the board casts its vote, the fixed rate would be locked in Dec. 17.
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