The RSD school board approved a resolution Oct. 21 authorizing staff to refund its 2008 general obligation bonds, if an attractive-enough interest rate becomes available. Refundings such as this can only be done once before the first call-date for bonds, in this case 2018.
A perfect storm of conditions have made refunding municipal bonds particularly lucrative, including the lowest rates for bonds in 40 years and high rates of return on state and local government securities, coupled with low-yield CDs and high-risk stocks that make the security of municipal bonds very attractive for investors.
“We could see significant savings,” Mollie O’Brien, director of fiscal services, told the board. State law mandates that public bodies may only refund bonds if it can receive at least 3percent in savings on the debt.
The resolution did not authorize immediate refunding, but enabled O’Brien’s department to be in position should an advantageous interest rate arise.
“Right now the market is very volatile, it’s all over the place,” said O’Brien. RSD issued $72.5 million in general obligation bonds in December 2008 to finance construction of a new elementary and high school. If the bonds are refunded, the savings would be passed onto the taxpayer in the form of lower tax rates during the life of the bond.