Bond Refinancing Could Save Haverford Township Schools Nearly $500,000

The Haverford Township Board of School Directors on Thursday night approved starting the paperwork necessary to refinance $10 million worth of bonds at a lower rate, a move which would save the Haverford Township School District $490,000, if the bond sale is approved later this month.

The refinancing proposal—which the district has been working on for several months—is unrelated to Moody’s Investors Service downgrading the district’s long term credit rating earlier this week to A1 from Aa2, School Board President Denis Gray and Superintendent William Keilbaugh said when asked about the issue by the Haverford-Havertown Patch after the meeting.

The district’s financial advisor for debt, Jamie Schlesinger of Concord Public Financial Advisors, told the school board that the district could save $488,000 to $490,000 over several years, by refinancing 2004 bonds.

The interest rate on the bonds would be reduced from 4.5 percent to 2.5 percent through the bond restructuring, Schlesinger said.

“Currently, we have hit an all-time low in interest rates again,” Schlesinger said.

Schlesinger asked the board to consider a motion to start the paperwork for the refinancing and said he would return to the board on Feb. 16 so that the board could decide whether to approve the sale of the 2004 bonds.

The board voted unanimously to approve the undertaking of all actions necessary to accomplish the issuance of General Obligation Bonds, Series of 2012 in the approximate aggregate principal amount of $10 million, the proceeds of which will be used to refund the district’s Series of 2004 Bonds.

Before the vote, Gray said he wanted to note, “We are not borrowing additional money. We are refinancing at a lower rate, therefore saving the district money.”

After the meeting, Keilbaugh told Patch that if approved by the board, the refinancing of 2004 bonds would not be affected by Moody’s lowering the district’s credit rating.

“It won’t affect it in any respect,” Keilbaugh said. “We predict our credit rating will go up in the long run.”

Moody’s credit “downgrade is based on the district’s narrow financial position following large operating deficits in fiscal 2009 and 2010.  The A1 underlying rating reflects the district’s moderately sized tax base with above average wealth levels and high debt burden with significant variable rate and swap exposure,” according to a press release from Moody’s.

The downgrade affects $113.1 million in previously rated outstanding general obligation debt, the Moody’s release said.  But what does this mean for the township’s residents?

“It doesn’t mean anything to residents,” Gray said. “It doesn’t change how the district’s being run.”

Residents should not expect taxes to increase or school programs to be cut because of the rating, Keilbaugh and Gray said.

Keilbaugh said the district is not a high financial risk. The district has maintained all of its programs and is projecting an ending annual fund balance of more than $2 million, he said.