The Mehlville Board of Education could save taxpayers as much as roughly $3.7 million over the next decade with the sale of more than $13 million in certificates of participation to refund certificates issued in 2002.
Board members voted 7-0 last week to adopt a resolution authorizing the sale of $9.5 million in certificates of participation, or COPs, to refund certificates issued in 2002 for the Proposition P districtwide building improvement program.
Those certificates were issued with the initial principal amount of roughly $46.8 million and currently are outstanding at roughly $21.3 million in principal.
The remaining $3.94 million in COPs will be sold in December or January.
LJ Hart & Co. is the underwriter for the transaction.
Information provided to the board by Chief Financial Officer Noel Knobloch states the average interest rate for the $9.5 million refunding will be 2.87 percent.
“LJ Hart has pre-sold all but $3 million of this $9 million at the 2.87 (percent interest) rate we talked about, so your resolution actually locks in that rate so it won’t vary,” Knobloch told the board.
The average interest rate for the remaining roughly $3.9 million in COPs is estimated at 3.25 percent, depending on market conditions at the time those certificates are sold.
In authorizing the sale last week, the board secured $1.2 million in savings on the $9.5 million in COPs, Knobloch said.
If the market remains relatively unchanged, the district could realize an additional $2.5 million in interest savings with the $3.9 million COP refunding, for a total potential savings of $3,780,316 over the next nine years, he said.
“(T)he $3.7 million worth of savings is what we’re shooting for,” Knobloch said. “We won’t know the exact savings until we do the second piece which will come either in late December or early January. We’re going to hold that piece back. But with the piece that we’ve concluded today with this resolution, we will lock in $1.2 million of that savings …”
Standard & Poor’s issued an “A+” rating on the transaction and an “AA-” rating on the district’s overall creditworthiness.
The agency’s report states its stable outlook of the district “reflects Standard & Poor’s expectation that officials will continue to monitor the district’s financial operations closely while making the appropriate adjustments to ensure the maintenance of close-to-balanced financial operations and strong reserves that are aligned with policy levels.
“The outlook is supported by the district’s participation in the diverse St. Louis area economy, particularly as it provides a solid foundation for employment opportunities as well as stable enrollment and property tax collections,” the report stated. “Given the district’s well-established financial management practices and its history of maintaining balanced operations, which we expect to continue, we do not expect the rating to change during the outlook horizon.”
