Tallmadge -- The Tallmadge City School District will soon complete its plan for refinancing bond debt that officials say will save taxpayers a total of $3.3 million in interest payments.
The Board of Education passed a resolution Feb. 20 that allows the district to move ahead with refinancing the remaining principal from the original debt it incurred when it raised approximately $30.2 million to build the new Tallmadge High School that opened in 2008. The final amount of bonds the district will refinance is $14.7 million.
Voters passed the bond issue to finance the new high school in November 2004, and in April 2005, the district sold the bonds. The bonds were set up so they would be repaid over a 28-year period with interest, with the district making two payments per year; the first is interest only, the second is principal and interest.
After paying down the principal since 2005, the district refinanced $8.5 million of the remaining bond debt last October through a bank-qualified sale, which limited the amount of bonds able to be refinanced to $10 million or less. The move resulted in interest savings of about $1.7 million over the remaining life of the bonds, according to Treasurer Jeff Hostetler.
Now the district will refinance the last portion of the bonds.
"We are choosing to do a non-bank qualified sale this time because the remaining bonds are over $10 million, and we would have to wait until 2014 to finish the rest," Hostetler said. "So, we are going through the process again and expect to save an additional $1.6 million this time around."
He said the timing of the two rounds of refinancing and the types of bonds sales will maximize the savings for the district.
Hostetler said the district will still pay off the estimated $30.2 million of original debt, and taxpayers will again benefit from this round of refinancing because the interest saved means the school district, in return, will need less from the taxpayers in the form of millage, to retire the debt.
The amount by which taxpayers' bills will be reduced is unknown at this time, but Hostetler said it will be "slight."
He said last October the favorable investment climate and the callable bonds -- ones that can be retired sooner that their maturity dates -- prompted the school district to consider refinancing the first portion.
"Bonds have to be callable in order to be refinanced, or the investment environment has to be such that the monies generated on a refinancing are able to pay the interest cost on the bonds until they are callable," he said. "In 2012, those things lined up so that we were able to refinance a portion of the bonds."
He said this type of refinancing is rare.
"It is somewhat uncommon for a district or political subdivision to do this because of the complexity of the process and the fact that all of the details of the issue have to line up for it to be beneficial," Hostetler said.