Mehlville School District taxpayers will save more than $1.8 million over the next decade after the district voted to refinance bond-like certificates.
Both the Mehlville School District’s Public Facilities Authority Board of Directors and the Finance Committee explored multiple options of how to repay the 2009 series of certificates of participation, or COPs, at their Dec. 5 meetings, and came to the conclusion to recommend to the Board of Education that refinancing would save the district the most money in the long term.
Clad in a festive tie, Mehlville Chief Financial Officer Marshall Crutcher said while presenting the refinancing to the school board at its Dec. 20 meeting, “I can’t not mention my tie, it’s got Santa Claus on it. Sort of represents the $1.9 million gift that the district is going to receive tonight. It’s really just good news, it’s a good news story.”
The board voted unanimously to refinance the 2009 series, which is callable in March.
The certificates were originally slated to be paid off in 2029, but the district will use the money saved on interest to prepay the debt and pay it off by 2022 instead.
The school district has paid on the COPs for the past decade and, under the current payment plan, will continue payments until the series is paid off in 2029. Between the biannual principal payments and interest, the district would spend $8,971,781 to repay the COP. Interest rates on the certificates are currently 6.85 percent.
Due to inflation and changing interest rates, the interest rate on the COPs can be reduced from 6.85 percent to 3 percent through refinancing. The school district will then be able to use the money saved from the reduced interest rate to pay more up front on the COPs. Refinancing will pay off the debt by April 2022 and save the district $1,876,051 in net interest taxpayers would have otherwise paid.
Another option the school district had to repay on the COP was to prepay, using the school district’s revenue that has been set aside in the COP fund. Under this plan, the school district would have paid $3.79 million up front plus the $335,000 principal payment, along with $217,746 in interest for a total first payment of $4,342,746 in March 2019.
The prepayment plan would have paid off the COPs by March 2024 and would have given the district a net savings of $1,729,735.