Looking once again to take advantage of low interest rates, the Central school system is planning to refinance millions of dollars in debt and pass along an estimated $130,000 in annual savings to taxpayers.
The School Board on Monday voted unanimously to refinance up to $21 million worth of sales and property tax bonds. Consultants estimate the refinancing will reduce bond interest costs by more than $1.3 million between now and when the newly sold bonds expire in 2030. That works out to roughly $100,000 a year in savings for the sales tax portion and another $30,000 to $40,000 a year for the property tax portion.
The suburban Baton Rouge public school district, which has a history of saving money for its reserves, last refinanced some of its debt in summer 2017, saving about $527,000 overall. The savings then were accentuated because the credit rating agency Standard & Poor’s had the year before upgraded Central’s rating from A+ to AA-.
A year after floods devastated most of Central, its public schools have emerged in good financial shape.
Grant Schlueter, a New Orleans-based bonding attorney with Foley & Judell, said current interest rates are “so doggone low,” lower than they were last time, that he’s hoping to do even better than the savings estimates once the new bonds go on sale.
The new sales tax bonds should go on sale in September. The new property tax bonds, known as general obligation bonds, won’t go on sale until December at earliest, thanks to federal financial rules, so the savings estimates with those bonds depend on the state of the market then, Schlueter said.
Both bond issues, however, will first be submitted to the State Bond Commission for its approval at its next meeting.
Schlueter said the new sales tax bonds will allow the Central school system to keep more of the money generated by 2½ cents worth of sales taxes and apply that additional revenue for the uses the voters have specified for those taxes, including employee salaries and school operations and construction. The savings from the new property tax bonds, if large enough, could be used to slightly lower the millage rate that property owners pay now in Central. The school district has reduced millages before.
Whether millage rates can be reduced once again, Schlueter said, won’t be clear until sometime in 2020 when there are better estimates of how much revenue property taxes will generate that year.