Financial issues dominate school board meeting
Jenny Kirk , Marshall Independent, March 20, 2012 –
MARSHALL – Financial adviser Joel Sutter of Ehlers and Associates, Inc. had good news for the Marshall School Board members at the meeting Monday night at Marshall Middle School.
Before passing, two action items received a lot of attention, including the sale of aid anticipation certificates and a resolution on refunding bond.
“We took bids this morning on the sale of your aid anticipation certificates of $2.5 million,” Sutter said. “We had three bids. The low bid was from Piper Jaffray in Minneapolis with a net interest rate of 0.4093 percent, which is about where we expected it to be. We expected about four-tenths of one percent. These are very favorable results, much lower than the previous times when you’ve issued aid anticipation certificates.”
Sutter also pointed out that the situation, while unfortunate to have to undertake, has been minimized by the current interest rates.
“It’s highly unfortunate that you have to do this, and it’s really a direct result of the state action to withhold state aids from school districts,” Sutter said. “If they weren’t doing that, you probably wouldn’t need to borrow money at all. That’s highly unfortunate. What is fortunate, is that the interest rates are so low. The total interest you’re going to incurred for doing this is $4,747.22. We would enthusiastically recommend you award sale.”
After approving the motion 6-0, the board moved to a discussion involving a resolution providing for the sale of general obligation school building refunding bonds in the total aggregate principal amount of $23,745,000 through a “crossover” refunding.
“This is a really good refund,” Sutter said. “The lowest the rates have been on municipal bonds in the last 45 years, since 1967, was 3.60. And that happened twice earlier this year. Two weeks ago, the index was at 3.72, which is not much about 3.60.”
Last Thursday, Sutter said, the index was up to 3.95, so almost a quarter percent higher than two weeks ago.
Business director Bruce Lamprecht asked Sutter if he suggested that the district “stay the course,” continue waiting and shoot for the target savings parameters previously set at $2,475,000 or change the parameters.
“With the opportunity to reduce taxes by this much, it’s hard not to jump at it,” Sutter said. “You only get to do it once, so you want to do it at an ultimate time. I don’t think there’s a right or wrong answer.”
Board chairman Jeff Chapman said he was in favor of changing the parameters from $2.5 million to $2 million
“I’d hate to lose the opportunity to save this amount of money,” Chapman said.
Marshall Schools Superintendent Klint Willert questioned whether the district should wait and watch the market over the next couple of weeks.
Others were concerned that the potential savings had already plummeted approximately $400,000 in two weeks.
“Based on current market conditions, we’re now estimating that it would reduce future debt service payments by about $2,409,000, with a net present value benefit of $2,120,000 or 8.41 percent of the present value of the bonds.”
“The impact of this, no matter when you do it, will be a reduction of property taxes. There won’t be any net benefits of the district’s budget, but it will be a reduction of property taxes. We estimate it at about $240,000 a year in payments.”
Board member Bill Mulso asked if a $2 million figure was “too low.”
“Should we pull the trigger a little sooner?” he asked.
Board member Tim Swenson said he’s worried about the trend he’s noticing.
“When the economy is going up, the savings will go down,” he said.
At the end of the discussion, the board first voted to revise the amendment, changing the parameters to reflect a profitable $2.25 million amount, which Ehlers could act upon after consulting with a district financial team that includes Willert and Lamprecht.
Then, the board approved the resolution, as amended.
The board also approved Kari Loft as a member of the community services board.
Bessie Skalicky and a handful of MPS students also gave a Knowledge Bowl presentation to board members, highlighting the benefits of the activity.