RBUSD saves $4 million in bond market
The Great Recession has put a hurt on the Redondo Beach Unified School District. The school board has been forced to trim $9 million from the district’s annual budget over the last three years.
But last week, RBUSD was able to cash in on the upside of the down economy and save local taxpayers more than $4 million by taking advantage of low interest rates to refinance a 10-year old school bond and enrolling in a federal economic stimulus program to help offset interest costs associated with 2009’s Measure C.
The district was able to reduce the interest on 2000’s $52 million Measure E from 4.76 percent to 3.07, reducing the tax bill by $1.79 million over the next 20 years. The interest on the $145 million Measure C was likewise reduced by $2.3 million over the next 30 years as the school district chose to enter the Build America Bonds program, part of the America Recovery and Reinvestment Act that offers a special 35 percent bond interest subsidy.
“It’s great,” said RBUSD Chief Business Official Janet Redella. “We couldn’t have timed the sales of our bonds better. I mean, this economy is horrendous and it’s hurting us in every other way, but we are taking advantage of the decline in a big way.”
The savings will be more cumulatively than individually significant for taxpayers. The refinancing of the Measure C bond, for example, will save taxpayers 79 cents per $100,000 of assessed value of their homes; taxpayers last year paid $29.97 per $100,000 in paying off the bond. The federal subsidy will represent a slightly higher but similar savings, bringing the interest down from an actual rate of 5.43 percent to an effective rate of 3.53 percent, far below market rates.
“The reality is it won’t save any taxpayer hundreds of dollars, but we are saving money for the taxpayers in the community,” Keller said. “It is a large number, and it’s the right thing to do and the right timing. It’s unfortunate the financial climate, in a larger social context, is tough on most people. But here is a slice of good news and we are happy to share it.”
“To me, it’s good governance,” said Timothy Carty, the director of Piper Jaffray, the school district’s longtime bond underwriters. “The school district did not have to do it. The district doesn’t get anything out of it, but it’s the right thing to do for local taxpayers.”
The school board approved both actions last week. Board president Drew Gamet said that when the district first began investigating refinancing, the savings would have been a few hundred thousand dollars.
“Which is no small change,” Gamet said. “But when it came out and we were cracking $4 million, it was like, ‘Whoa! I’m glad we are doing this.’ It’s keeping your eye on the prize. And hopefully we are setting a precedent for future school boards.”
The district is also millions of dollars under budget and ahead of schedule on many of its Measure C bond construction projects, another result of the lagging economy – the soft construction market has allowed the district to obtain bids far below original estimates.
Gamet said by saving taxpayers $4 million the district is demonstrating fiscal responsibility.
“It does benefit the school district,” Gamet said. “You see people always tearing down public government, saying that government isn’t watching out for things. That may be true in some cases, but not in this one.” ER