The Denison Independent School District Board of Trustees voted unanimously Tuesday to refinance some of its ongoing bond debt dating back to 2011. By refinancing these bonds, estimated at about $9 million, the district is expected to save nearly $1 million over the course of the bond’s lifetime.
“This comes up every once in a while with districts that have bonds,” DISD Assistant Superintendent Randy Reid said Tuesday afternoon.
Under the proposal, the district would settle its current bond and rebid the remainder of the debt at a lower rate. At the time of the issuance, the rate was close to 5 percent, which was a good rate at the time, Reid said. However, since then the market has changed and the city can get a much lower rate.
Matthew Boles, representing bond counsel RBC Capital Markets, said the rates today are at about 3.83 percent, but with the district’s credit rating it could likely expect rates closer to 2.886 percent. This comes with the city’s A-plus rating with Standard & Poor’s.
These rates would allow the district to save about $82,000 each year through 2029, with savings of less than $30,000 for the remainder of the bond. Boles said this represents about a 10 percent savings on the bond for the district.
“Usually issuers will consider this (refinancing) at 5 to 6 percent, so you are well beyond that point,” he said.
Board President Randy Sedlacek asked how confident Boles was in the district’s S&P rating, and if it would stand up under reassessment. Board Secretary David Hawley also asked for updates on the rates as the expected sale of the bonds approach in late May.
“I think we have been very conservative in all our estimates,” Boles said, voicing his confidence in the ratings.
These bonds are one of three bond packages that the district has outstanding. The other two packages date back to 2013 and 1997. However, the bonds from 2013 were not discussed for potential refinancing.
The board asked about the possibility of refinance savings from the 1997 series, but Boles said those bonds could not be reissued, and are expected to be paid off in 2021.
Sedlacek voiced his approval for the refinancing, noting that it provides the district the chance to save money easily over the lifetime of the bond.
“When you look back at it, $980,000 is a lot of money and you don’t always have this opportunity,” he said.