During its meeting today, the Salina USD 305 Board of Education unanimously approved refinancing bonds that will save the school district $1,904,624.
In addition, the outstanding bonds of the district will be paid one year sooner with the final payment occurring in 2033.
The portion of the outstanding bonds being refinanced had an average interest rate of 2.61 percent and the average interest rate on the new Refunding Bonds is 1.36 percent, which results in a reduction of 1.25 percent, according to information from the district. The lower interest rate results in a savings of $1,904,624 over the remaining life of the bonds while also paying off the bonds one year earlier than scheduled.
The district has always looked for opportunities to lower the interest expense and generate a savings for the taxpayers. Since 2001, the district has completed several bond refinancings that have resulted in the cumulative savings for the taxpayers that now totals $12,247,021, according to information from USD 305.
The bonds being refinanced are primarily related to the 2014 bond election that funded construction and renovation of schools throughout the district. The bond refinancings and resulting savings have allowed the district to set the mill levy for the repayment of the bonds well below the estimated mill levy shared with voters during the bond election campaign.
"We’ve seen improvement in the bond market and interest rates now allow us to achieve this savings," said Linn Exline, superintendent. "This is a good opportunity to save dollars in a way that doesn’t affect people or services."
The district benefits from being one of the highest rated school districts in Kansas. Moody’s Investors Service assigned a bond rating of "Aa3" to USD 305. The strong credit rating is a result of the district’s cash reserves, financial management, and its moderately sized tax base serving as economic center for the region. Maintaining a favorable bond rating is important for the district as it helps to lower the interest rate on the bonds and, in turn, reduces the interest expense for the taxpayers.
According to Greg Vahrenberg, managing director at Raymond James & Associates, "The district should be very proud of its bond rating of 'Aa3,' which is well above average for school districts in Kansas and nationally. In Kansas and nationally, there are very few school districts that achieve a bond rating in the 'Aa' category and Salina USD 305 has maintained its rating in the 'Aa' category for over a decade."