On July 14, the Riverside-Brookfield High School District 208 Board of Education unanimously voted to borrow nearly $6.4 million to help pay for so-called life-safety work at the school.
To soften the blow on taxpayers, the board, taking advantage of low interest rates, also voted unanimously to sell no more than $15.7 million in additional 10-year general obligation bonds to refinance the first chunk of bonds sold in 2006 to help pay for the $66 million renovation and expansion of the school.
Refinancing the existing debt is projected to save taxpayers about $190,000 since the 20-year 2006 bonds were paying an interest rate of about 5 percent, and interest rates are much lower now.
The net effect of the refinancing and the sale of new life-safety bonds is that the owner of a home worth $250,000 is projected to pay an additional $68 a year in property taxes to pay off the seven year life-safety bonds.
The tax hit should first show up on the second installment of next year’s property tax bill. That $68 increase could be reduced in subsequent years if the board chooses to again refinance the bonds that financed the renovation and expansion.
District 208 also received a bond rating upgrade last week. Standard & Poor’s gave the bond sale a strong AA+ rating, saying the district has a stable outlook.
“That is just one notch below the very highest bond rating,” said Elizabeth Hennessy of William Blair, the district’s financial advisor.
Hennessy said this is the first time a District 208 bond sale has been rated by Standard & Poor’s, but she said that the AA rating is equivalent to a two-notch upgrade from the last time District 208 bonds were rated. In 2008 Moody’s Investor Services gave District 208’s working cash bonds an Aa3 rating.
The S&P analysts wrote in their report that their AA rating for District 208 primarily reflects four factors: “participation in the broad and diverse Chicago area economy, strong income level, very strong operating reserves and moderate debt burden with rapid amortization.”
Hennessy said that S&P analysts were also impressed by the progress the district has shown in improving its financial position and the cost controls the district has implemented in recent years.
Superintendent Kevin Skinkis said the district has recorded four straight years of operating budget surpluses. With final numbers still coming in, Interim Chief Financial Officer Tim McGinnis told the school board last week that he is now projecting that the district will end up with a $49,000 operating surplus for the 2014-15 fiscal year, which ended on June 30.
Skinkis was pleased with the ratings upgrade.
“The district has worked hard to get its budget and operations in order,” said Skinkis. “The upgrade in our rating reflects the hard work of all the stakeholders.”
The life-safety bonds will be sold sometime in the next week, Hennessy said. The true interest cost of the bonds is projected to be about 2.5 percent or perhaps lower given the ratings upgrade.
The $15.7 refinancing bonds will be sold in late August or September. The proceeds of that bond offering will be put in the bank until the 2006 bonds are called on Dec. 1, 2015.
The district expects to spend about $4 million of the $6.4 of life-safety bond proceeds on work that is being performed this summer. It will spend the remaining $2.4 million on life-safety work next summer. Board members decided to sell all the life-safety bonds now, because they didn’t want to risk possibly higher interest rates next year.
The life-safety work being done this summer includes partial roof replacement on the high school building, new bleachers for the football field and some other improvements.