District saving $85,000 by refinancing old bond

The Princeton School District will be saving about $85,263 because the School Board last week awarded a bid to refinance the remaining bond maturities in the district’s $2.74 million general obligation school building refunding bonds of 2003.

The $1.75 million principal and close to $76,647 in interest in the new refinancing will total $1.81 million.

The approximate savings of $28,000 per year during the three-year refinancing term ending February 2017 won’t be noticed in the tax statement that district taxpayers will soon receive this fall estimating their 2014 taxes. That is because the refinancing came after the statements were put together. But taxpayers will notice some effect from the refinancing savings when the district finalizes its 2014 levy in December, according to Michelle Czech, the district’s director of business services.

“It’s wonderful,” Czech, said about the refinancing terms.

The winning bidder out of the five bidders for the newest refinancing is BMO Capital Markets GKST Inc., out of Chicago. BMO is providing an interest rate of 2 percent and the underwriter is paying a premium of about $55,000 to purchase the bonds. BMO offered the lowest total net cost of just over $22,501, and provided the lowest true interest rate at 0.5558 percent.

The interest rate on the old bonds that are being refinanced range from 3.7 to 4 percent.

Lower interest rates of late, along with the district’s excellent bond ratings from Moody’s Investors Service (Aa2 for the credit enhanced rating and Aa3 for the underlying rating), plus the premium the underwriter paid contribute to the savings.

The refinancing interest rate is better than the estimate Ehlers had given the School Board on Sept. 24, when the board gave Ehlers the OK to go out for bonding bids. Ehlers at that time estimated the district could save nearly $55,000 by refinancing, which would be about $30,000 less than it will save now, according to projections.

The closing date for the refinancing will be Nov. 21.