The Temple Independent School District’s refinancing of 2011 bonds will save taxpayers about $6.3 million over 15 years, administrators said.
These 2011 bonds, with varied interest rates between 3 percent and 4.25 percent, initially were sold in an effort to fund the district’s capital projects. But when the district explored an opportunity for refinancing, Specialized Public Finance — Temple ISD’s financial advisor — estimated lower market rates between 2.5 percent and 3 percent, the district said.
“A bond refunding is the voluntary restructuring of bond debt,” Kent Boyd, Temple ISD’s assistant superintendent of finance and operations, said in a news release. “It’s comparable to refinancing a mortgage with a few notable exceptions. Unlike refinancing a mortgage, districts must wait a predetermined amount of time before the bonds are callable.”
Temple ISD’s 2011 bonds will become callable — eligible to be paid off before the maturity date — in February. However, the district said it began strategizing for the refunding process in early 2020 when the school board forwarded administrators the opportunity to browse the market.
“Another difference between restructuring bond debt versus mortgage debt is that interest rates vary for each year of the term, but, unlike variable rates for mortgages, rates are not subject to future market conditions and are instead agreed upon in advance at the sale of the bonds,” Boyd said.
Chief Financial Officer Kallen Vaden stressed how Temple ISD analyzed length, maximum size and minimum savings when seeking a more favorable rate.
“It was estimated that, with market rates as they were, we could effectively accomplish a savings of 11 percent, or $3.9 million, for our taxpayers over the course of the term,” she said in a news release.
But Temple ISD will save taxpayers more money with its new rates after district administrators officially refunded the bonds with a near 19.7 percent in savings throughout the term’s remainder.
“The money saved does not go into the district’s bank account. It is simply money that we will not collect from our taxpayers to meet the district’s financial obligations,” Superintendent Bobby Ott said. “This community committed to funding the projects outlined in the 2011 bond election by voting for it. We owe it to our taxpayers to look for any way we can lessen their tax burden throughout the bond process.”
Savings are anticipated to be seen in early 2022.