“We really appreciate them doing this,” Schools Superintendent Dr. Bobby Hathcock said.
The council is expected to approve a resolution Monday night, allowing the school board to refinance a bond issue on which the system still owes about $2 million.
Officials say with the school board going through the city to refinance the old bond issue, they can wait to put the bonds out for market when interest rates are at their lowest, thus seeing a substantial savings with reduced interest rates.
Hathcock said it is a lot like refinancing your house.
“We expect to see a substantial saving,” he said.
City officials say the debt will not go against the city’s debt service or affect the city’s credit standing.
“It’s sort of a no-brainer,” Mayor Bill Hereford told the council at a Thursday work session. “It’s a good deal.”
Mara Walls, the school board’s chief financial officer and custodian of funds, said the bond the board is refinancing was originally secured in 1996 but was refinanced in 2002.
Walls said in 2002, the school board owed $3.2 million on the bond, but as of Sept. 30, 2009, the board only has about $2 million of debt remaining on the bond issue. That is the amount the board is refinancing.
She said the refinancing will not increase bond debt payments and the loan is expected to be paid off within the same amount of time as the old debt, which is 2018.
Walls said the school board expects to save or receive a refund of about $107,000 from the refinancing of the 2002 bond issue.
“This will help us,” she said.
Hathcock said with back-to-back proration years because of the economic downturn, the School System is experiencing hard financial times, the worst he’s seen since working in education.
The council recently approved a 1-cent sales tax hike, which it will split with the School System for the next four years.
That money will allow the school board to complete $4.7 million in renovation and addition projects at Iola Roberts Elementary and Pell City High schools. The board is paying for that work with a low-interest rate federal loan it secured through the American Recovery and Reinvestment Act of 2009.
The school board has not received the construction loan but expects the allocation of those federal dollars at any time.
Also at Thursday’s council work session, Walls introduced Tanya Holcomb, who was hired by the school board as the system’s assistant custodian of school funds.
Holcomb is expected to move into the top financial officer slot for the board when Walls retires in September.
Contact David Atchison at datchison@dailyhome.com
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