USC School District Anticipates Savings
Refunding bonds with lower interest rates should help district's financial picture.
A better interest rate on bonds is projected to save Upper St. Clair School District more than $3 million.
The school board voted Monday to authorize investment banking firm Boenning & Scattergood to proceed with preparations to refinance a 2005 bond issue. The agreement will be prepared for action by the board at its Sept. 10 meeting.
“This seemed to be a very opportune time as we look to the future,” said Frosina Cordisco, district director of business and finance, noting that interest rates may fall as low as .6 percent in the current climate.
The 2005 bonds are for a total of $25.52 million, with a final payment date of 2027. Nearly $11.5 million in interest payments would be due under the interest rates at the time of issuance. Refunding the debt service cuts the interest payments to about $7.4 million.
Most of the savings will occur between 2013 and 2020, according to figures (see PDF) presented by Michael Bova, managing director, public finance, for Boenning & Scattergood. During the first five years, annual payment on the principal will be nominal.
“We’re pretty happy with the savings we can deliver to the school district,” Bova said.
In September 2011, the district refinanced a 2006 bond issue, reducing payments by a projected $400,000.
Dr. Patrick O’Toole, superintendent of schools, said the savings come at an opportune time, especially considering the district’s mounting financial obligation to the state Public School Employees' Retirement System, along with other expenses.
“This may help allow us not to furlough some people,” he said.
The school board also voted to retain Lisa Chiesa of Thorp, Reed & Armstrong as bond counsel. The firm has worked with the school district on previous bond issues.