Schools move to cash in on low bond rate
Lower available interest rates will have a positive impact on local pocketbooks due to recent action taken by the Carbon District School Board. During their May session, the board made final approval of the issuance of up to $2 million of general obligation refunding bonds, saving local tax payers just over $45,000 in the process.
According to Zion's Bank officials present at the meeting, the debt service lending agreement will remain the same over the next three years, changing in 2015, at which point the majority of the $45,000 in savings will take place.
In exact terms, the board will be restructuring $1,978,000 in order to save $45,367 with a new interest rate of 1.42 percent.
"I think this works well," said Alex Buxton, Vice President with Zion's Bank Public Finance. "As the board moves forward with both your five and ten year plan."
Buxton reported that the board's business administrator Darrin Lancaster was responsible for both taking notice of the change in rates, as well as moving forward with the bond restructuring. And while Lancaster's ingenuity was an vital part of the savings plan, the district's financial past also played a large role in the project coming to fruition.
"The district received an A1 bond rating during this process, which is investment grade," said the Zion's VP.
According to documentation provided by Buxton at the meeting, "the rating given to the district primarily reflects your well maintained financial operation, moderately sized but concentrated tax base heavily dependent on coal and other petro-chemicals as well as a low debt profile with rapid payout."
The Zions official reported that the only matters which could improve the district's financial position are out of their hands, including diversification and an increase in the local tax base. Adversely, the only situations which could negatively effect the district would include a rapid deterioration in the area's tax base.
"The state bond guarantee which the district was able to take part in will make these bonds triple-A rated, which is why you were able to get the 1.42 percent rate, the state of Utah is guaranteeing these bonds," explained Buxton.
According to Lancaster, the sole purpose of this bond sale was to insure a savings for local tax payers, as well as a better financial position for the district.
To formally adopt the terms of the new bonds, the district was required to adopt a bond resolution which would insure that the district agree to the new terms and that the bond agreement close on May 24. Aside from one brief question concerning an escrow issue, the board adopted the resolution by a unanimous vote.