The Bartholomew Consolidated School Corp. is approaching the issuing of new bonds with a sense of urgency, hoping to lock into low interest rates before they go up.
“Rates are at historic lows, and we keep pinching ourselves wondering how long it will last,” said Vaughn Sylva, assistant superintendent for financial services with the school system.
Last fall, school officials approached their Wall Street advisers, Citi Securities, and asked the analysts to project how much in new bonds could be issued by summer 2013 without raising the school district’s total indebtedness from last year’s level.
The answer came back to Sylva’s office Sept. 20: Because a batch of 2002 school bonds would mature — and be fully paid off — this year, BCSC could issue an estimated $23.5 million in new bonds and maintain its same level of debt payments.
The estimate was based on the school system going to market no later than spring or summer 2013 and paying bondholders an average 4 percent interest rate on the new debt.
If the entire proposed bond is approved by the school board, school district officials say property owners won’t see their net tax rates rise from what they have been paying.
But if no new bonds were issued at all, and school officials skipped making more school repairs, taxpayers would see their school tax rates drop by 3.8 cents next year, Sylva estimated on Monday.
That would translate to an estimated $38 less in taxes paid out per year on $100,000 of property.
BCSC Superintendent John Quick said even though 14 schools are listed as getting proceeds to make repairs or renovations once a bond issue wins approval, the school system would go to the bond market only once with a single bond sale to net money for all of the repairs.
Work likely would be done over two years, Quick said.
If interest rates rise between now and the bond sale, more of the $23.5 million in proceeds would go to pay capitalized interest charges. Bond attorneys’ fees and architectural fees also come out of the proceeds, reducing the amount available for school improvements.
Longer-term bonds generally must pay a slightly higher rate because a buyer may hold the debt for several years until maturity. Shorter-term bonds carry less risk of market shifts and generally go to market at cheaper rates. School administrators are not yet sure what borrowing period they will pursue.