CK schools could save $1 million in bond refinance

It’s a bit like refinancing the mortgage on your home to get a lower — and more affordable — interest rate.

The five-member Central Kitsap School Board voted unanimously to refinance part of its outstanding bonds to save taxpayers more than a cool $1 million, said Gary Powell, assistant superintendent of business and operations.

The refinancing lowers the district’s bond tax rates by more that $1.19 million over the remaining life of the bonds — until 2010.

The mechanism to do this: The board approved issuance of $28 million in refunding bonds at its regular Wednesday, May 1 meeting.

“Every now and then, market conditions are just right to refinance our bonds,” Powell said.

Powell didn’t think the dip in the nation’s interest rates was due directly to the Sept. 11 terrorists attacks, though the economy took a hit soon after, and is still recovering, he said.

“Actually such long-term bond rates have more to do with the confidence of investors” over the long term, he continued. When the economy is booming, investors often fear inflation will raise rates. Ironically, a slump in the economy helps make such refinancing practical.

“But there’s no inflation seen,” he said.

The district’s been monitoring bond market conditions over the past several years, and recent low rates enabled the district to actually exceed the planned savings’ target, he said. Interest rates today average 4.57 percent on the new bonds, compared to 5.45 percent on the old.

In issuing the bonds, the district’s “A1” bond rating was reconfirmed by Moody’s Investors Service.

CK Superintendent Dr. Catherine Davidson said, “This is part of the district’s on-going effort to reduce the burden on taxpayers whenever possible. These savings flow directly to the taxpayers through reduced tax rates.”

The depressed economy has, indirectly, helped the school district in dealing with its long-term bonds.

The “nice thing” about the school bonds, Powell pointed out, is that the state backs the bonds.

There are two kinds of financial mechanisms school districts use to supplement state and federal funds.

School bonds finance capital improvements, such as new construction. Levies finance such things as maintenance and operations.

The district easily passed a 4-year levy by a super-majority in March that replaces the 3-year levy which is due to expire December. In 2001, the $10 million the local levy raised allowed matching funds from the state of $11 million.

The levy runs from 2003 to 2006 at a percentage rate of $2.83 per $1,000 assessed property value on properties in the district. This was approximately the same rate the voters approved for levies in 1995, 1997 and 1999.

Each dollar of the levy supports:

• 80 cents — school classroom support

• 10 cents — student activities

• 9 cents — buses

• 1 cent — after-hours use of facilities

Over the past seven years, levies have constituted about 10.2 percent of the budget. No levy dollars go to administration.

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