School district moves to refinance bonds

School board members took the first step towards refinancing two bonds during their meeting on Thursday, which could potentially save the district an estimated $1.8 million if the bond market holds until January.

The two bonds — in the amounts of $39.3 million and $17 million — were both issued in 2009 to finance the construction of the new high school and were refinanced for a better interest rate in 2012, according to Superintendent Jody Wiggins.

School board members approved motions for each bond that will allow the district to submit applications for the bonds, employ First Security Beardsley Public Finance as a fiscal agent, and allow the superintendent to accept or reject the best bid on the bonds when they go up for sale in January.

Interest rates dropped to a 40-year-low in August and “have been on a slow roller coaster” ever since, according to Scott Beardsley of First Security. The district has been monitoring the rates for about six months but will not be able to take action until January 2020, he said.

If the market holds approximately where it is, the savings on the $39.3 million bond could be $1.27 million and the savings on the $17 million bond could be $546,194, according to Beardsley. The savings will be unrestricted and will be concentrated in 2020.

“To give you a feeling about volatility, if the market is 25 basis points lower, it will save another

$700,000 but the flip side is also true,” Beardsley said.

When it becomes closer to time to accept bids, Beardsley said he will have conversations with Wiggins about how much savings the district should accept.

The next step in the process will be to submit the documents to the Arkansas Department of Education for approval, then to run a legal notice in the local newspaper, Beardsley said. A bid packet will go out to investment firms around the country before bids are accepted, he said.

“The school district can stop the process at any point up to Jody saying yes,” Beardsley said.

If the district decides to decline the bids, the only cost will be the publication of the legal notices, he said. The finance fees will be rolled into the cost of the new bond issue.

“It’s a fairly low risk proposition for the school district to go out and see how much money you are going to save and whether to accept it or reject it,” he said.