SMMUSD HDQTRS — A well-timed refinance on Santa Monica-Malibu Unified School District bonds will save taxpayers $2.8 million, district officials announced last week.
The district took advantage of historically low interest rates and refinanced roughly $40 million worth of Measure BB bonds, a $268 million measure originally approved by voters in 2006.
The refinance targeted the first series of the bonds which were issued in 2007 and used for design, planning and architecture for early BB projects, said Jan Maez, chief financial officer for the district.
“We are excited to provide our taxpayers with over $2.8 million in property tax bill savings,” Maez said. “We believe it is our responsibility as stewards of public dollars to take advantage of this bond refunding opportunity.”
The process is similar to the one property owners go through when refinancing a home mortgage. Homeowners ultimately save money by reducing their monthly mortgage payments or shortening the years of the mortgage debt.
The refinance secures lower interest rates without extending the terms of the original bonds, according to a press release.
If you’re going to refinance, now is the time to do it, said Daniel Berger, senior strategist of municipal market data for Thompson Reuters.
“It’s a very advantageous time because rates are so low,” Berger said. “The bias is that rates generally could increase in the foreseeable future. For now, they’ve locked in those savings.”
The Federal Reserve committed to keeping interest rates low until the national unemployment rate reaches 6.5 percent — it’s currently at 7.8 percent, according to the U.S. Bureau of Labor Statistics.
At the same time, California state policy sweetened the municipal bond market, Berger said.
The passage of Proposition 30, a statewide measure that raises sales tax and some income taxes to benefit education, and Gov. Jerry Brown’s projection of an $800 million surplus have led markets to improve their outlook on the state’s credit, Berger said.
It takes seasoned professionals to recognize and take advantage of those kinds of market conditions, said Laurie Lieberman, the newly re-elected president of the Board of Education.
“We are fortunate to have such a capable and hard-working (chief financial officer) as well as a strong financial advisor, who constantly monitor the district’s finances while watching for opportunities like this,” Lieberman said.
The district’s own double-A credit rating is very strong as well and local property values have been on the rise.
“The Santa Monica-Malibu name recognition is important,” Maez said. “It’s a very recognizable sale offering and strong community with strong assessed value, which helps.”
That credit rating is the second highest that a school district can have, and puts it well above many of the other districts in the state that are strapped for cash.
The district has done three series of bond issues through Measure BB funds. Officials will likely go out for their fourth next week, assuming market conditions hold, Maez said.
Although residents will see a break on their property taxes as a result of the refinance, it’s unknown how long that will last.
The new series will add additional debt to the tax rolls, and the district already has authorization to put out another $385 million in bonds as a result of Measure ES, a new bond approved by voters on Nov. 6.