NEW MADRID - A move by the New Madrid County R-1 School Board will save taxpayers more than $142,000.
During its February meeting, the board voted to refund a $2,120,000 general obligation bond, reducing interest rates to about 2.08 percent from about 4.21 percent. According to Paul Northington, director of business and finance for the R-1 School District, this will reduce future interest expenses by about $106,575.43 prior to reimbursement from the state for some of its costs of issuance.
The general obligation bonds were issued initially in 1994 for the construction of the district's Middle School.
Also the board approved a resolution authorizing the sale of $720,000 in lease refunding certificates of participation at an average interest rate of about 2.71 percent. The previous interest rate was 4.80 percent on the certificates which were issued to fund an energy performance contract the district entered with Honeywell. The contract provided for retrofitted buildings with more efficient lighting and improvements in the heating and cooling systems.
With the sale, the district will reduce future interest expense by about $35,825.92, Northington said. He noted the combined savings from the two refundings totaled $142,401.35.
Northington explained that three factors made the refundings possible. These were the drop in interest rates from 1998 when the certificates were issued and from 2001 for the bonds, the fact that the bonds and certificates were subject to prepayment on March 18, 2003, at no penalty and the district's ability to participate in the State of Missouri's Direct Deposit Program under Senate Bill 301 for the general obligation refunding bonds. Through the state program, the district received a "AA+" rating from Standard & Poor's Corporation on the refunding bonds and is to receive reimbursement from the state for some of its costs of issuances if the General Assembly restores full funding to the direct Deposit Program during 2003.
The refunding bonds were purchased from the district by L.J. Hart & Co. which prepared the refunding proposal. Closing on the refunding is set for March 6 with the actual prepayment of the series 2001 Refunding Bonds and the Series 1998 Lease Certificates set for March 18.
Board members voted unanimously for the refunding and praised school officials for their work on the proposals.
"It is nice to be able to save $142,401.35 of our taxpayers' money with these refundings and to boost the total of interest savings from the Series 1994 Bonds and the Series 1998 Certificates to $604,931.35," said Harvey Graham, vice president of the Board. Graham was referring to savings the district received from refundings due to interest rate reductions conducted in 1996 and 2001.
Dr. Mike Barnes, superintendent, expressed enthusiasm for the refunding. "These plans help the district take advantage of the very low interest rates presently available while still preserving considerable flexibility for the district in the future," Barnes said.
Referring to this flexibility Board President Randy Porter explained the $142,401.35 in savings is not all the district may realize. The refunding bonds and lease refunding have a call feature in March 1, 2005, at no penalty.
"If interest rates are lower in 2005 or later we can take advantage of that," said Porter. "Meanwhile we are locking in these levels that are about 2.04 percent lower than they were for the Series 2001 Refunding Bonds and 2.09 percent lower than they were for the 1998 certificates."