Wednesday, February 23, 2011
New Bloomfield The Board of Education here has agreed to refinance a $600,000 general obligation bond at a lower interest rate, saving the district approximately $80,000 in interest during the life of the bond.
The board approved a bond refunding recommendation by its bond advisor, L. J. Hart & Co. of St. Louis. Thomas J. Pisarkiewicz, vice president of the bond firm, prepared the refunding proposal.
The $600,000 bond was issued in 2006 at an interest rate of 4.43 percent. It is callable on March 1. Pisarkiewicz recommended that the board call the bond and resell it at a current lower interest rate of 3.32 percent.
With this refunding plan, the district reduces future interest expense by $79,877 and shortens the final maturity on the original 2006 bonds by one full year.
This $79,877 plus the savings of $814,985 from eight previous refinancings of bond issues by the board means the district has saved $894,862 in interest expense since 1992, Pisarkiewicz said.
Thomas C. Baugh, interim superintendent of the New Bloomfield School District, expressed his support for the refunding option chosen by the board.
“This plan achieves good savings and takes advantage of current market conditions without significantly altering the total annual debt service payments,” Baugh said.
Board President Leroy Wade said another benefit of the almost $80,000 in savings was that the refunding bonds have a call feature in 2014 at no penalty.
“If interest rates are lower in 2014 or later,” Wade said, “we can take advantage of that. Meanwhile, we are locking in these levels that are more than 1 percent lower than they were in 2006.”
Pisarkiewicz said three factors made refinancing of the $600,000 bond issue especially attractive. They are a lower-interest rate, the bonds were not subject to a refinancing penalty and the district is eligible to participate in the State of Missouri’s direct deposit program.
The direct deposit program makes it possible for the district to receive an “AA+” rating from Standard & Poor’s Corporation on the refunded bonds.
Pisarkiewicz praised Baugh for his “prompt and thorough preparations to supply the data necessary for the rating application and official statement, as well as the board’s foresight in making the 2006 bonds callable in five years.”
The refinanced bonds were purchased from the district by L. J. Hart & Co. and Pisarkiewicz mentioned that United Security Bank purchased $100,000 of the bonds.
The closing for the Series 2011 refunding bond issue will be on Feb. 28.
Several board members praised Baugh and Pisarkiewicz for developing the attractive refunding plan.
“It is nice to be able to save $79,877 of our taxpayers’ money and boost our total interest savings with L. J. Hart & Co. to about $894,862,” said Susan Bedsworth, vice president of the New Bloomfield School Board.