School board looks to refinance debt

Published 10:30 pm Wednesday, February 2, 2011

Randy Rushton offered no answers Wednesday, just a question for the Troy City Schools Board of Education.

“It’s up to you; whatever you want to do,” he said to the board.

Rushton is working with the school board on the refinancing of its existing debt in a new bond issue. Recent changes in the bond market, driven primarily by a rise in interest rates, prompted Rushton’s visit to the board’s work session on Wednesday.

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“I wish I had better news,” he said, explaining that since the board approved the letting of bonds in November 2010, interest rates have risen abut 60 basis points. “Your decision is this: we can go forward and know where we are, or you can wait and see if the rates come down.

“If you go now and the rates go up, you’re heroes.”

Moreover, he said, “if we lock in the rates and they go down substantially, we can refund these rates to lower rates. But if we don’t lock in rates now, and the rates go up, we can’t get back to these.”

The board is considering a bond issue that would generate $15 million in new capital funds for the district, money board members have considered using for construction of a new middle school; a new preschool facility; and repairs to the existing cafeteria at Charles Henderson High School, among other things.

However, the change in interest rates since initial discussions translates to about $10,000 more per month in debt service over the life of the bonds.

That rise in debt service prompted board members to discuss the next step, particularly given upcoming proration concerns. Keeping a minimum of three months’ operating expenses in reserve, some $5 million, is a key consideration, said Dr. Judson Edwards, vice president of the board.

“But I also keep coming back to construction prices right now,” he said. “Inflation is on the move … we may have a lot of buying power right now, but a year from now we may lose some of that just in the price of lumber.”

Board members already have approved the bond issue, and the next step before entering the market would come in conjunction with the authority established solely for the purpose of authorizing borrowing.

Board members did not take any action during their meeting, but Rushton asked them to consider the next step and respond within a week or so.

The board members also met with Sally Howell, executive director of the Alabama Association of School Boards, to begin the process of outlining criteria for a new superintendent and the search process.