The Chelsea Standard
A Heritage Newspaper
Weekly Publication
School bond refinancing saves $2 million for taxpayers
By Edward Freundl, Staff Writer
PUBLISHED: November 1, 2007
The Chelsea School District has taken advantage of near-historic low interest rates to refinance its debt and save a considerable amount of money on interest.
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Unlike a homeowner who might save several thousand dollars on a mortgage, however, the district stands to save more than $2 million.
"We just got great news with the re-funding of our bonds," said Chelsea School Superintendent David Killips.
"Over the life of the bonds the school district has saved over $2 million in costs, mainly in the area of interest costs."
Teresa Zigman, Executive Director of Business and Operations for the district, said district administrators were "excited" at the prospect of not having to spend so much on interest payments.
"We knew the market was moving in our favor, but we didn't know how far," she said, and likened it to the recent wave of mortgage refinancings.
"When a homeowner does that, they pay less on a mortgage, and it's the same way with bonds."
The interest savings is stated over the life of voter-approved bonds, from today to 2025.
"Our prior interest rate was 5.01 percent, and now it's down to 4.24 percent," Zigman said. "When you're talking $29 million, it's a pretty good chunk of change."
According to a press release from UBS Securities, the district will see a savings of approximately $2,056,000 in total debt service costs by refinancing $28,590,000 of the district's outstanding bonds.
"The district was in the enviable position of being able to time its entry into the bond market and capitalize on the low rates currently available," said David Kahn, Executive Director of the UBS Securities LLC Lansing office.
"This would not have been possible without the extra effort by the business office staff," he added.
Kahn also commended the board of education and administration for their efforts to achieve the lowest possible interest cost for the taxpayers of the district.
UBS is the underwriter of the bonds, and the district worked with financial adviser Stauder, Barch and Associates Inc. to complete the transaction.
The district's bond rating is excellent, according to two major financial ratings firms. Standard & Poor's rating for the district is AA-, while Moody's gives it an A2 rating.
However, Zigman noted, the "refi" won't have an immediate effect on the district's bottom line.
"The taxpayers would see relief in their winter 2009 tax bill," she said.
Another issue that could affect the projected savings is the end result of a lawsuit file by Chrysler over its $100 million property tax valuation of the Proving Grounds south of Chelsea.
"That's been sitting at the state Supreme Court for a year," Zigman said.
"We won't know what that impact will be until that ruling comes down."
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