CLEARFIELD – The Clearfield school board will consider refinancing bonds after hearing a financial analysis from Jamie Doyle of The PFM Group, the district’s independent financial advisor, at Monday night’s committee meeting.
At the end of June, interest rates hit all-time new lows as a result of the Brexit vote, or when the citizens of the United Kingdom voted to leave the European Union.
“… It doesn’t get much safer than Pennsylvania school district general obligation bonds,” Doyle said. “… That’s the good news as we talk about your refinancing opportunity.”
According to her, the district currently has three viable refinancing opportunities in its $7.16 million in G.O. Bonds Series of 2011; its $9.995 million in G.O. Bonds Series of 2012 and its $9.54 million in G.O. Bonds Series of 2014.
The call dates are set for these as March 1, 2017 for the 2011 bond series, March 1, 2018 for the 2012 bond series and March 15, 2019 for the 2014 bond series. “Some of the call dates, seem pretty far away,” she said.
“But the reality is you are allowed one time in the life of each new money issue to do what’s called an advanced refunding.” Doyle noted that this was being proposed on two of the three bond series.
With there being three series of bonds, she proposed a three-step plan. In step one, the district would advance refund the 2014 bond series, and if it were to settle at the end of November, its estimated net savings would be $666,631.
Then, in step two, the district would do a current period refunding of the 2011 bond series. And, if it were to settle in December, the district’s estimated net savings would be $138,266.
In step three, the district would advance refund a portion of the 2012 bond series. This step would settle in calendar year 2017, and the district’s estimated net savings would be $291,334.
In total, the district could realize an estimated net savings of just under $1.1 million. “It would do a nice job of smoothing out your existing debt portfolio,” Doyle said. “We all know you have other things in your budget to think about.”
If the district grants approvals for the bond refinancing, Doyle proposed that it use the competitive Internet auction platform that it has in the past.
She provided the district with a sample motion for each of three steps, and each included a blank space for the district to set a minimum net savings target.
But historically she said advance refunding and current period refunding benchmarks are 3 percent and 2 percent, respectively.
Doyle explained that she would like to see the board vote at its regular meeting next week in order to authorize the refinancing plan. She told board members she’d remain in constant contact with the district’s administration regarding the market conditions throughout the process.
