By MIKE ANTHONY

Executive Editor

A proposal to refund general obligation bonds issued in 2003 by Lindbergh Schools could save district residents as much as $500,000, according to Chief Financial Officer Pat Lanane.

The Board of Education voted 6-0 last week to begin the process of advance refunding the 2003 bonds. Board Treasurer Kara Gotsch was absent from the Nov. 8 meeting.

As proposed, Lindbergh would sell $9.07 million in general obligation bonds to refund the bonds issued in 2003. Because the 2003 bonds are not callable until March 1, 2013, the proceeds from the sale of the refunding bonds would be used to purchase U.S. government securities, which would be deposited in an escrow account, according to Lanane.

The principal and interest earned on the government securities would be sufficient to retire all the debt associated with the 2003 bonds when they are callable on March 1, 2013.

“… This is what I call one of those opportunity items, that we see an opportunity that in our current financings to save the taxpayers some money. And we have done many of these in the past. We did one last year, 2001 series bonds. This is 2003 series bonds …,” Lanane told the school board, noting that currently many homeowners are seeing the opportunity to refinance their homes at a lower interest rate. “… In fact, I talked to my guy today — he’s actually a parent in the district — about refinancing my home.

“And it’s exactly the same type of thinking behind this, that the rates have gone down and there’s an opportunity to advance refund — meaning pay off early through the purchase of investment articles such as T (Treasury) bonds, those types of things — to advance refund early a bond issue and simply take advantage of the lower rates right now,” he continued.

“We look at this very carefully because you can only do this once. So there is a risk whenever you look at a refunding and your risk is are you kind of cashing in at the best possible time? And I’ve seen some districts do this when maybe the savings were 1 percent or something like that. And you sometimes wonder what the motivation was and was that really the best time?

“So we’ve tried to maintain a rule that we don’t do these unless that we think there’s a very good chance we’ll see at least a 3-percent net savings. We believe it will be more than that. In fact, if the refunding were today, we’d be looking at about a half-million dollars. And it’s important to note, that’s not a half-million dollars that comes to the district that’s now available for us to spend,” Lanane told the board.

“Well, it’s a half million we’ll never see. It’s a half million less in taxes paid by taxpayers in the future. We just think that this is a duty we have to take advantage of these type of opportunities whenever we think they may exist …”

The district’s independent financial adviser, WM Financial Strategies, is recommending the district pursue the advance refunding of the 2003 bonds and Lanane said he was asking the board for the opportunity to begin the process.

“… If we get up to the day of the sale and the 3 percent is — if it’s close, we’d still do some more analysis because the question you ask yourself: Where are rates going in the future? Well, good luck with that one, but I do think they’re going up in the future,” the CFO said. “So you might even press this a little bit harder than normal because the long-term thought is they only have one way to go. There’s not much room to go any lower. So this is one where we’ve actually squeezed that 3-percent number a little bit. If we got 2.8, 2.9, we might still recommend we go. But if it falls way off from that, then we’d say: The sale’s off. We’re not going to do it …”

As proposed, the sale of the refunding bonds would take place Feb. 14, Lanane noted.

Board member Vicki Englund asked Lanane, “And should we get the point where we’re at the day of (the sale) and it’s not making much sense, how much money will the district have to expend in order to get to that point?”

Lanane replied, “I think there’s about $14,000 in costs that you just have already done — a rating. We have to get another bond rating, all those types of things … But the savings are just so great, the potential, that I just think it’s well worth the risk to do that work and be ready and cash in on that day, if we can get anywhere near that 3 percent, which is at least 270-something-thousand dollars …”

He also noted that amount of the advance refundings the district has done over the past 20 years totals “millions of dollars.”

“… These are kind of fun in my world because it’s actually saving someone’s money, which we don’t get enough opportunities to do that I feel sometimes,” Lanane added.

Board President Vic Lenz later said, “… You just mentioned something that was interesting to me. Sometime, not a rush at all, but I would like to see a report on how much we’ve saved over the years that we’ve done these refundings. How much money have we saved the taxpayers of our district? That would be an interesting thing to see …”

Lanane said, “Will do.”

In a separate matter last week, the Board of Education voted 6-0 to accept an audit of the district for the fiscal year ending June 30 that was performed by Kerber, Eck & Braeckel.

The audit gave the district an unqualified opinion — the best possible opinion — with no findings or instances of misstatement. This is the 19th consecutive year that Lindbergh Schools has received a perfect audit.