The savings that Northwest Allen County Schools could see through refinancing bonds has decreased with market fluctuations, board members learned Monday.
The board last month authorized the district to refund some of its bonds – a process Superintendent Chris Himsel compared to refinancing a mortgage – to create a savings of a minimum of $2.75 million. The savings would be seen when the district issues new bonds at lower interest rates.
But after going through the required legal process, including advertisements and a public hearing, the district will see savings decrease to about $2 million because of changes in the rates.
The board passed a resolution Monday to lower the minimum savings amount.
I’m disappointed, but I will second (the motion), board member Ron Felger said.
The district will seek advice on whether to move quickly or wait a few days. Other board members expressed disappointment that the savings will not be as great, but NACS business manager Bill Mallers said a gap in the timeline before the purchase of the bonds couldn’t be helped.
Felger agreed. I don’t think anyone sitting here could have done anything differently, he said.
The savings will be used to purchase technology and make improvements to the district’s buildings, as property tax caps have chipped away at the district’s fund, which is supported by property taxes. Last year, NACS saw a loss of more than $3.3 million to its total budget.
Board members heard more about the negative effects of the tax caps during a budget presentation Monday from Mallers on NACS’ bus replacement and capital project funds, both supported by property taxes.
Mallers said the advertised budget for 2014 will total $5.96 million, but he expects the state to approve about $5.1 million. Property tax caps will further decrease the fund to about $3.3 million, about $1 million less than in 2013. Overestimating creates a cushion because districts often don’t collect as much revenue as they expect.
When you get that low, there’s a concern there, Mallers said. It’s definitely an issue.
After technology and utilities are paid for, not much is left in the fund for building maintenance, Mallers told board members. Many of the improvements like roof replacements and heating and cooling upgrades in the 2014 plan were carried over from the previous year because the district couldn’t afford the projects, he said.
The outlook for the bus replacement fund was also grim, but not because of property tax caps. In recent years, lawmakers placed a cap on what districts can spend each year to buy buses. Superintendent Chris Himsel said it has hurt growing districts like NACS.
The district is scheduled to replace nine buses in 2014, but it will likely be able to afford only six, including one that was scheduled to be replaced in 2013 when money was not available.
Mallers told board members he expects to petition the Department of Local Government Finance to adjust the district’s maximum, because the current one will not meet the district’s needs. For now, Mallers said, he’s comfortable with the 11 spare buses the district has, but as a growing district, we do need to keep an eye on that.