Joining Joyce McIntyre, Hernando County School District’s Director of Finance and Purchasing, for Tuesday’s workshop presentation on a bond refinancing maneuver was Ritesh Patel, the school district’s bond counsel with Nabors, Giblin and Nickerson P.A. and Laura Howe with Public Financial Management, the district’s financial management advisor.
The purpose of the refinancing maneuver is to extend an annual $200,000 state revenue stream for another 18 years after 2031, when bonds are set to expire. By keeping the bonds in place, the state cannot change legislation to alter the state funding stream per a special legislative act.
Patel warned that if the district does not choose to refinance the debt, after 2031 the legislature could repeal the special act or modify it to change the revenue stream that the district shares with the county. By securing the debt with the revenue funds, the special act says the legislature won’t adopt, repeal or modify the special act to reduce the revenue source or impact certificate holders of these bonds.
Superintendent Stratton succinctly explained, “To keep the $200,000 coming in, we have to have debt out there and that’s the million we are borrowing. We can infuse that into our schools immediately to keep $200k times 18 (years) and bring in roughly $3 million over that period of time.”
McIntyre explained that the plan is to refinance a revenue bond which will allow cash options – possibly about $1 million to use to finance the cost of acquisition, construction and installation of certain capital improvements at various district facilities.
Howe said that it’s a good time to refinance as rates are nearing historic lows. The current debt service rate is 5% on the original $3 million bond. By refinancing the rate will drop to 2.9%. The district’s resolution states the rate cannot exceed 3.75%.
They have consulted with the facilities department on projects which would meet state tax code requirements. Patel explained that under the tax code, there are restrictions on how long you can finance improvements. The useful lives for the proposed projects were provided by the facilities department and Patel said there wouldn’t be any tax issues with those projects.
Patel gave some background on the state funds being received by the district. They are originally racetrack and Jai Lai funds guaranteed to be paid by the state. Racetrack and Jai Lai funds were depleted in 2000 and in 2009, the legislature replaced the parimutuel funds with a portion of state sales tax. “So that’s actually what the security is,” explained Patel.
Back in 2009 the legislature replaced the parimutuel funds with a portion of state sales tax so that’s actually what the security is… It’s a portion of the state sales tax that comes through to the district every year. The racetrack and Jai Lai funds were depleted in 2000 and they’ve since been replaced with a portion of the sales tax revenues which comes to the district every year.
Proposed improvement projects to be funded by the $1 million include bathroom epoxy floor replacement, classroom carpet replacement, cafeteria and hall VCT floor replacement, replace rotten covered areas with new metal insulated roofs… replace failing lights with LED lights.
School board member expressed some concern about extending the debt service another 18 years for $1 million in capital improvements. “By the time we get to 18 years down the road, we’ll have to replace these (make the improvements) one more time.”
During the school board meeting that evening, school board members took the first steps to refinance the bond. They unanimously approved a resolution authorizing the issuance of Capital Improvement and Refunding Revenue Certificates, Series 2020 under several parameters.