The Riverside-Brookfield High School District 208 Board of Education will try to take some of the sting out of issuing new debt by refinancing some of its long-term debt from the 2006 building referendum at lower interest rates.
The school board is considering borrowing $7.6 to $7.8 million, likely in two installments, over the next two years to pay for life-safety improvements. If the district issues life safety bonds, they would be paid off through a new, separate levy on property tax bills.
Life-safety bonds can be issued without the need for a referendum as long as they fall within the district’s debt service extension base, which is determined by a formula based on the debt payments the district had in 1994.
The proceeds of life-safety bonds can only be used for projects approved by the Illinois State Board of Education and the Regional Superintendent of Schools. The district is considering selling $4 million worth of life-safety bonds this summer and $3.6 million in January 2016.
When combined with anticipated savings from refinancing existing long-term debt, the net impact to property taxpayers could range anywhere from an additional $19 to around $100 a year for a home worth $250,000, depending on how long it takes to pay off the bond issue.
The projections were made at a May 12 public hearing by the district’s financial advisor, Elizabeth Hennessy of William Blair & Co. Hennessy gave tax-impact estimates for a variety of alternatives, including selling five-year, seven-year and 10-year bonds.
“We want to have minimal impact on the taxpayers by issuing this debt,” said board member Garry Gryczan said.
According to Hennessy’s presentation, the district could save, based on today’s interest rates, as much as $500,000 by refinancing the bonds that paid for the $63 million renovation and expansion of RBHS several years ago.
“That’s practically free money in our pocket,” said board member Laura Hruska of the savings.
But those savings are based on current very low interest rates. The savings could shrink if interest rates rise by the time the existing debt can be refinanced. The first batch of bonds that can be refinanced cannot be paid off until Dec. 1. A second batch can’t be paid off until Dec. 1, 2017.
The district could, for a price, engage in financial maneuver called negative arbitrage, and borrow more money now to pay off and refinance the bonds callable in 2017 if it thinks interest rates will rise substantially in the next two years. The district could also borrow the entire $7.6 million in life-safety bonds this year to take advantage of current interest rates.
The downside of that would be money sitting in a very low-yielding account for a year before using it all the while paying a higher interest rate on the borrowed money.
“In this low interest rate environment it’s better to borrow the money close to when you are going to spend it,” Hennessy said.
The life-safety money will be spent on roof repairs, new bleachers in the main gym and swimming pool area, flood prevention, masonry work and tuck pointing. About $4 million in bonds that are likely to be sold this summer could be used on the $9.8 million project the district is undertaking this summer to pay for new stadium bleachers among other things.
The public hearing held last week on bond issue will have to be repeated on June 9, because the required public notice of the hearing was incorrectly published in the wrong edition of a large suburban newspaper chain, Superintendent Kevin Skinkis said.
The hearing on May 12 about the need for concrete and asphalt life-safety work will also have to be repeated.
Only two members of the public spoke at last week’s public hearings.
The board could make a decision to sell the life-safety bonds as early as its July 14 board meeting and could sell the first batch of bonds this summer.
This story has been changed to correct the annual impact of the bond issue on the tax bill of a $250,000 home.