Board Members of the Brownwood ISD voted unanimously Monday to adopt parameters for refinancing of school bonds which will save the district approximately $4.6 million of dollars over the next 20 years.
George Williford, Managing Director for Fist Southwest and bond advisor for Brownwood ISD for many years, explained the savings and the process of refinancing the Series 2005 bonds to board members. He explained that the refinancing will be done through a parameter bond sale, which does not lock into pricing on the date of the board meeting but rather allows the issuance of bonds in a “day-to-day” mode, meaning bonds can be priced at any time and in an interest rate environment that is advantageous.
Through the parameter sale, the board set optimum standards for bond sale which included a maximum interest rate of 4.75%, minimum present value savings threshold of 7.00%, aggregate principal amount of issue of $27,610,000 with a final maturity date of February 15, 2030, and the expiration of delegated authority to either the superintendent or deputy superintendent as the pricing officer is limited to 6 months. The original amount of the school bonds were $31,745,480 according to Williford.
“If the district refinances in January or February, there won’t be any penalties; however, the savings of refinancing would far offset the cost of penalties (currently at $175,000 or less),” said Brownwood ISD Superintendent Reece Blincoe. He explained that the district could conservatively save as much as $300,000 per year over the next 20 years if they refinance the bonds. This would mean 3¢ back to the taxpayers in their BISD tax rate next year. The district already dropped the tax rate 5¢ for the current year.“We are supposed to be good stewards of the taxpayers’ money and we’re trying to help everybody out,” Blincoe stated. “Tax evaluations of properties went up this year and we hope what we’re doing will help off cushion some of that.”
Williford explained the timing of the refinance. After the board’s acceptance of the parameters of the bond sale, the BISD’s ratings would be considered next week, which is expected to be a good rating according to Williford. With a good rating of AA and bond insurance, Williford explained that the savings could possibly be greater to the district. During the final week of October, underwriters will make plans to market the bonds during the first two weeks of November and the rates would be locked in after this process. He stated that if the district follows this timeline and closes on the refinancing of the bonds in late November or December, the savings would be locked in and the district would be ahead of other districts in the state which would consider refunding their bonds in January or February.
The savings with the current market environment could save the district $4,668,248, according to Williford.
