Cape school officials refinance bonds in advance

An advance refinancing of bonds by the Cape Girardeau School District will eventually save some $236,000 and may even allow for the construction of a new auditorium or football stadium, officials say.

On Friday, the Cape Girardeau School Board approved the advance refinancing of $2.27 million in bonds from the 2000 bond series, which originally totaled $18 million in general obligation bonds used for the construction of Central High School.

Refinancing this portion of the bonds allows the district to lower its average interest rates on the bonds from 5.47 percent to 3.39 percent. When the bonds are paid off in 2019, the district will have seen an estimated savings in interest of $236,000.

A school refinancing bonds is similar to a homeowner refinancing a mortgage to achieve a lower interest rate. The advance refinancing will actually take effect in 2010. After that, the district will see a decrease in bond payments that will leave additional reserve balances in the debt service fund -- the fund the district uses to make bond payments.

Using those fund balances, the district might eventually consider a no-tax-increase bond issue for an auditorium or a football stadium at the high school or other building needs in the district.Cape Girardeau school officials say they have considered refinancing for three years but that now appears to be the most advantageous time to go through with it because of an increase in short-term interest rates.

That increase now benefits the district, said chief financial officer Rob Huff, because the advance refinancing places the bonds in an interest-bearing escrow account between now and 2010.

"We could do it a month from now and we might miss out on savings," said superintendent Mark Bowles. "But the risk is, two months from now we may find out we were wrong and should have waited."

Of the original $18 million in bonds, $12.27 million is callable in the year 2010. After Friday's refinance of $2.27 million, there remains $10 million that can be refinanced before 2010.

Bowles said the district will consider refinancing the remaining bonds in 2005. Officials with L.J. Hart, the refinancing underwriter, said refinancing the $10 million could save the district an additional $1.4 million in interest.

The refinancing changes nothing in the district's day-to-day budget because the saving won't begin to take effect until after 2010. By 2007, however, there may be enough additional revenue in the debt service fund from growth in assessed valuation to allow for a no-tax bond issue.

"This is a way to make sure we won't have to raise the debt service," said Huff. "It gives us flexibility in case we see no growth in assessed valuation."

At their regular meeting Monday night, the board will consider a similar refinancing of lease purchase certificates from an addition on Central Junior High's cafeteria.

cclark@semissourian.com

335-6611, extension 128