Duluth School Board to vote on debt refinancing
The Duluth School Board on Tuesday will once again consider refinancing and restructuring Red Plan debt. The move, recommended by administration, is expected to reduce taxpayer burden by nearly $1.7 million over the next eight years. Two bonds --...
The Duluth School Board on Tuesday will once again consider refinancing and restructuring Red Plan debt.
The move, recommended by administration, is expected to reduce taxpayer burden by nearly $1.7 million over the next eight years.
Two bonds - of the four that paid for the $315 million long-range facilities plan - will be refinanced. Depending on the market, one could save about $1.6 million and the other $108,000.
Refinancing these two bonds would not affect the district's budget, said superintendent Bill Gronseth, but it would be "savings that go directly to the taxpayer."
Matt Rantapaa, of Robert W. Baird & Co. Incorporated, said the market is very favorable right now for refinancing these bonds.
The School Board is also considering restructuring one of the remaining two bonds from the Red Plan. The life of the bond would be extended by six years and cost the district nearly $500,000 more in the long run, but extending the life of the bond would free up about $700,000 annually over the next 10 years in the district's general fund.
"The extension is a way to increase the amount of general fund that we are able to spend each year, although it extends it for six years," Gronseth said. "It's a way of kind of stabilizing us over time."
Duluth school district CFO Cathy Erickson reiterated that sentiment in a memo to the School Board last week.
"The district needs time to stabilize the budget, to assess critical needs and requirements, and to start working toward district goals," Erickson wrote. "This restructuring opportunity will be a very important first step in the budget stabilizations process."
Over the past several years, the Duluth school district has had issues with a depleting balance - unrestricted money - in the general fund. The district ended the 2017-2018 fiscal year with about a $1.4 million fund balance, which is approximately 1 percent of the district's total budget.
The board rejected a resolution to refinance the debt in November because market variability had decreased potential savings.
If the board approves the resolutions Tuesday to refinance two bonds and restructure another, it will have until Oct. 1 to approve the sale or the resolutions will expire. The anticipated sale date is June 1.