Dearborn Schools' Bond Refinancing Saves Taxpayers Nearly $1M
The millage rate will be recalculated this spring, according to the district.
An effort to refinance two bonds for Dearborn Public Schools resulted in good news for taxpayers, the district announced Monday at its Board of Education meeting.
By refinancing a portion of a 2003 refunding bond and a total building and site bond from 2004, the district was able to realize "significant" savings of nearly $1 million.
Attorney Matt Hiser of Thrun Law Firm, who worked with the district on the refinancing, explained the process to the Board of Education.
"This was generated by the fact that the school district was notified by its financial adviser ... that there might be an opportunity to achieve some savings for the school district's taxpayers by way of refinancing two of its outstanding bond issues," Hiser explained.
The district approved a resolution on Dec. 10, 2012, to move forward with the refinancing effort.
"The savings ... had to be at least 3 percent—that's kind of an industry standard: you don't move forward with a bond issue unless you can achieve at least 3 percent."
The refinancing also required that the school district apply for a bond rating. The district, Hiser said, maintained its rating of of Aa3, "which is a very good rating; a difficult rating to maintain."
As such, the district was successful in refinancing the bonds with a savings of 8.33 percent—"a phenomenal savings," Hiser said.
That amounts to $927,000—adjusted for principal and interest down from $1.06 million, according to DPS Business Services Director Samuel Barna—that taxpayers won't have to pay.
"The savings that the school district achieved are going right back to the school districts' taxpayers by way of reduced millage rates," he added. "Unfortunately, from an operational standpoint, the savings doesn't help the district on general fund, but it does directly help its taxpayers."
Barna said it's not clear yet what the savings will mean for the district's millage rate, which is also affected by property values in the city.
"If all else is equal, millage rates will go down," he said. "If property values decline, millage rates could not go down."
Currently, the school district's debt millage rate is 5.81 mills. School district millage rates will be recalculated in May or June.
"I think a lot of times people think that we refinance these bonds to get our money back," commented Trustee Amy Schoelles. "This is something that we do on a regular basis through our finance team to find opportunities to save our taxpayers money."
But taxpayers could soon be seeing the district requesting that they approve more funding in the near future, according to Superintendent Brian Whiston.
Whiston said Monday that conversations on asks for new bonds for such things as security, technology, buses and facilities would be coming up at the Board of Education's March 11 and 25 meetings.
"We have buildings that look great," he said, "but we're not investing in our older buildings, and we need to do so."
The district will also likely need to replace several buses in its fleet in the near future, as well as upgrade technology to comply with new electronic standardized tests that will be implemented in 2014.
All bond issues would have to go before voters for approval.