Steamboat Board of Education expected to vote to refinance 2006 Soda Creek bond
November 9, 2015
Steamboat Springs — The Steamboat Springs School Board is expected to approve next week the refinancing of a bond that helped with funding the reconstruction of Soda Creek Elementary School.
Two general obligation bonds totaling $27.7 million were used to rebuild Soda Creek and make improvements at Strawberry Park Elementary School, and the district's investment banker last Wednesday recommended a $9.9 million bond issued in 2006 be refunded and refinanced for interest rate savings.
A similar refinancing took place with the district's 2007 series bonds in two parts in 2013 and 2014.
"We're refinancing the debt at a lower interest payment, that's why it's a good thing," said Mark Rydberg, district finance director. "It's good for the taxpayers, because they're going to be paying less interest on the debt."
RBC Capital Markets Director Dan O'Connell recommended the refinancing in a memo to the school board and district administration.
"Refinancing debt is much like refinancing a home mortgage. When interest rates are lower than they were at the time of the original issuance, the district may refund the original bonds for interest savings," O'Connell's memo said.
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According to the memo, the 2006 bonds are currently outstanding at a 4.125 percent interest rate, and they could be refunded and refinanced at an interest rate of 2.6 percent, a gross estimated savings about $1 million and a present value savings of about $887,000, or 9.56 percent in savings.
The refinancing would lead to savings of about $40,000 annually between 2016 and 2022 and $195,000 annually between 2023 and 2026, the memo said.
Previous refinancing of the 2007 series bonds was completed in the last two years with an expected savings of $1.29 million to district taxpayers.
The refunding does not extend the term or structure of the bonds but lowers annual payments.
The board showed support for the refinancing during its meeting last week and is scheduled to vote on the proposed refinancing during its Nov. 16 meeting.