Source: Sherman Publications

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District looks to refinance bond debt, save $45M

by Lance Farrell

May 16, 2012

The Oxford Community Schools Board of Education received a presentation from Umbaugh and Associates representatives Mike Givler and Jesse Nelson on Monday, May 7. Umbaugh presented the OCS Board with a very attractive offer.

According to Assistant Superintendent Tim Loock, "an opportunity has presented itself for us to use taxable bonds to pay back the debt owed to the School Bond Loan Fund" (SBLF). The SBLF is a fund to enable school districts to meet capital needs for construction projects not covered by the current millage rate. The SBLF owed by OCS carries an interest rate of 4.625 percent.

The school district has a newer debt as well, taken out of the School Loan Revolving Fund . This newer debt is taxed at three percent.

Because bond interest is at such a low mark, Umbaugh's proposal is for the district to borrow money to repay the older, higher interest bearing debt.

The older debt would then bear a much lower interest rate of three percent for about four years. By doing so, the school board has the opportunity to save the community approximately $45 million over the life of the bond as presently financed.

"No one has done exactly what we're doing," Umbaugh's Mike Givler said. Even though it's beneficial for all parties to go ahead with this plan, Umbaugh is waiting to hear back from the department of the Treasury and the bond council before proceeding.

Personally, Givler said, "I'm not sure I see a down side" to the refinancing proposal. If all goes as planned, Givler expects the bond to be refinanced by the end of the summer.

School board members liked the sound of Umbaugh's proposal, and will likely authorize the district administrative staff to proceed with the transaction.

The authorization is not the final step, and if any changes occur in the market, the Board will still have an opportunity to reverse its decision.

For the time being, the board is looking favorably at the proposal. As Loock surmised, "any chance to save the community $45 million, then why not?"