Tamaqua area adjusts savings threshold for bond refinancing
The Tamaqua Area School District plans to adjust its potential savings threshold for the refinancing of two of its bond issues.
The district's finance committee discussed the refinancing Tuesday night, with Business Manager Connie Ligenza providing an update.
In October, 2009, John B. Kelly of PNC Capital Markets, Philadelphia, who has consulted Tamaqua Area on past refinancings, proposed the district consider doing the same on two current issues, one from 2001 that has $815,000 outstanding, and primarily, a 2003 issue that has $3.1 million outstanding but that won't reach full maturity until 2020.
The Tamaqua Area Board of Education had authorized Ligenza and Kelly to move forward on the refinancing if the district could reap a savings of at least $95,000.
Ligenza revealed that since last October, interest rates haven't cooperated with the district's desired threshold and Kelly hasn't been able to pull the trigger on the refinancing.
Kelly had suggested it might be in the district's best interest to have their outstanding bonds rated, which would incur an expense of $4,500 and could be the best way for the district to lower its interest costs as low as possible. Ligenza explained Kelly had since changed his mind and felt the district should just have bond insurance instead.
Interest rates have hovered at a level that would give the district a return of $60,000 and $75,000 from refinancing the bonds, about $20,000 less than the board's sought-after savings threshold.
"Typically, you look for a threshold of $100,000 in savings or 1-1.5 percent on the principal, so that you can pay all fees and make it worthwhile," said Ligenza.
"The economic indicators might be sliding away from us," said Board President Larry A. Wittig. "We've done this 3-4 times before, and we saved about $230,000 in one instance, but the market has slipped away and hasn't come back."
"Should we lower our target?" asked Treasurer Daniel E. Schoener, who chairs the finance committee. "Maybe we can go with $75,000 gross with state reimbursement."
The committee agreed with that assessment, and recommended recalculating the original motion to refinance the bonds with the threshold at $75,000.
In other business, Ligenza presented an updated budget control for the current school year.
Expenses are at $13.8 million through the end of January, or about 46.5 percent of the 2009-2010 budget, as compared to $13.4 million, or about 48.4 percent, through January 2009.
The district has collected almost $17.6 million in revenue, or 69 percent of its 09-10 budget, as compared to almost $17.8 million, or 71 percent, through the same period last year.
Regarding tax revenue, the district has collected $9.8 million so far, an increase of $95,000 through the same period last year, Ligenza said.