The Gardner School Board agreed to refinance old bonds for a $560,000 savings on Oct. 17.
Eric Hansen, business director, told the board last month that a combined refunding of 2004 and 2005 series bonds would yield a net savings of about $1.5 million as a result of historically low interest rates.
However during that time, fluctuation in the interest rate market reduced potential savings by 3 percent.
Hansen recommended refunding the 2004 bonds ($1.29 million) for a savings of about $562,342, and holding off on the 2005 bonds ($1.276 million).
“At this point in time the savings on the 2005 series doesn’t seem to be sufficient enough to move forward with refunding those bonds,” he said. “However, the 2004 bonds still seem to meet our litmus test which is a 4 percent minimum present value savings target.”
The refunding will take place in November.
Hansen said the ordinance allows him the option of refunding either or both series of bonds depending on how interest rates fluctuate between now and then.
“The sale will be conducted in November, assuming the interest rates hold well, we will proceed with refunding the 2004 bonds,” Hansen said. “If interest rates rebound in our favor, the 2005 bonds may be more advantageous for us to review. The resolution gives us the flexibility to proceed with either one of the sales individually or both of the sales collectively.”
Hansen will present the results of the sale in November.
Hansen told the board last month the main difference between the two bonds is their call dates.
The 2004 bonds are callable on Oct. 1, 2112, and the 2005 bonds are callable on Oct. 1, 2014.
Another consideration is the current state of interest rates.
Hansen said the Federal Reserve recently enacted a plan to shift a substantial amount of its investments from short-term to longer term securities in the interest of driving down long term interest rates.
The refunding was recommended by the district’s finance committee.
In other business, the board:
• approved an annexation agreement with the city of Gardner to established cost sharing responsibilities in creating a benefit district for infrastructure improvements needed to support a planned 40-acre elementary/middle school campus on Grand Street between Center Street and Moonlight Road.
The new schools are among several projects included in a $72.8 million bond issue that will go before voters in January, 2012.
After about an hour of discussion on Oct. 10, the council instructed staff to develop an annexation agreement that would “commit the school district and city to funding 50 percent of the new infrastructure needed to develop the site (Grand Street, water and sewer connections).”
The city would also pay 100 percent of a $1.3 million sewer upgrade that was already in the city’s capital improvement plan, but would be bumped up to 2014-15 to accommodate the school construction.
The city’s share of $254,000 in debt service for the Grand Street improvements s expected to result in an annual tax increase of 2 mills.
Sewer upgrades are expected to result in rate increases of as much as 5 percent.
Gardner Electric would be responsible for negotiating electric service for the site.
• hired Shafer, Kline and Warren for civil engineering services related to bond projects for $41,000.
• accepted a low bid of $11,280 from Professional Services Industries for geotechnical services.
USD 231 to refund bonds