Residents of the McKinleyville area have been especially sensitive to their school district’s debt in recent years. Back in 2012, this website discovered that McKinleyville Union had issued some extremely dodgy bonds the year previous – bonds with especially long repayment terms, and very high debt-to-principal ratios.
Last fall, the district was able to knock about $13 million off the $53 million outstanding it owed on these “capital appreciation bonds” (CABs), refinancing some of its debt into something resembling more conventional financial instruments. The news last week was that the district did that again, though on a smaller scale.
Superintendent Michael Davies-Hughes told the Outpost this morning that his district’s action last week should save taxpayers about $1.2 million over the lifetime of the debt. The most recently financed bonds were not the scandalous CABs, Hughest said – they were another $7 million issued shortly before, at reasonable repayment rates.
However, borrowing money has become far cheaper in the years since these bonds were issued, and Davies-Hughest said it made sense to refinance now. The deal the district’s board of trustees chose last week knocks a year off the total repayment schedule, and locks them in at a reasonable 3.48 percent interest rate.
All the bonds mentioned above were issued to finance big capital projects throughout the district’s facilities – McKinleyville Middle School, Morris Elementary and Dow’s Prairie Elementary. And in the next couple of months, the final element of those projects should be complete: A brand-new 500-seat gym at McKinleyville Middle, near the intersection of Central and Railroad avenues.
“We’re really pleased we’re going to be able to put the final capstone on that construction project,” he said.
Press release from the district follows.
- Paying $56 Million to Borrow $4 Million: School District Capital Appreciation Bonds in Humboldt County
- McKinleyville Union Superintendent on His District’s Capital Appreciation Bonds
- McK Union School District Calls Special Early Morning Meeting to Refinance Huge Bond Debt
Press release from McKinleyville Union School District:
McKinleyville Union School District has recently refunded outstanding general obligation bonds, which will save the district’s property owners over $1.2 million in taxes. The refunding bonds, totaling $6,630,000, were originally authorized by more than 55% of voters at the June 2008 election and were used to repair aging classrooms, make energy efficiency improvements throughout the District, and build a gym at McKinleyville Middle School (scheduled for completion in August 2015).
The interest rates on the outstanding bonds from the 2008 authorization ranged between 4.50% and 5.25%. The interest rates for the new bonds issued May 28th will be between 0.35% and 3.43%, a difference that will save property owners $1,202,720.
“Our office is diligent in monitoring our debt obligations and will seek any opportunity to help taxpayers within our District save money,” said Jeff Brock, District Business Director.
Superintendent Michael Davies-Hughes added, “Last September we were able to save taxpayers over $21.0 million by refinancing old bonds and we couldn’t be happier to save another $1.2 million today. Our community has always been supportive of our schools and this low interest rate environment has allowed us to save property owners even more.”
The refinancing of the bonds was authorized by the District Board at their May 13th meeting. “As fiduciaries to our community, our board felt saving taxpayers additional money was the right thing to do,” said Board of Trustees President, Brian Mitchell.
Property owners in the District will see a reduced tax rate on future tax bills.