DUBLIN – The Dublin Unified School District (DUSD) restructured nearly $34 million in tax-exempt bonds earlier this month, taking advantage of historically low interest rates.
The move also avoids huge future balloon debt service payments on bonds issued in 2009 at the height of the Great Recession. It is expected to save taxpayers more than $46 million in current value over the life of the obligations.
“We don’t see any more dollars,” said Chris Hobbs, interim assistant superintendent of business services. “This is purely a benefit to taxpayers.”
Refinancing the debt fulfills one of the district’s strategic goals of ensuring effective resource allocation and operating efficiency of the school system.
The Board of Trustees on Oct. 13 voted to authorize converting so-called capital-appreciation bonds (CABs) with interest rates of about 6.5% into current rate bonds. The funding was part of Measure C, the $184 million in school facilities bonds approved by voters in the Dublin Unified School District in 2004.
The CABs, secured through property taxes based on valuation, deferred compounding interest and principal payments for decades with a massive payment of interest and principal due when the debt matures.
The California legislature in 2013 cracked down on the use of CABs by setting the maximum maturity date to 25 years, limiting the debt service to principal ratio to 4-to-1, increasing disclosures to school boards and allowing districts to pay them off early, as Dublin is now doing. The Election 2004 Series “E” Bonds issued in 2009 were originally scheduled to mature in 2039 and 2044.
Sales of the new general obligation bonds took place on Oct. 27 and 28 and closed on Nov. 12, carrying interest rates ranging from about 1.8% to a little over 2%, according to the Municipal Securities Rulemaking Board’s market access website. Factoring in nearly $300,000 in fees, charges and commissions paid to third parties, the true interest cost of the 2020 bonds is estimated to be just a hair above 2%, based on a calculation from the district’s municipal advisor.
Hobbs said the bonds were sold through a competitive bidding process and awarded to the bidder providing the lowest interest cost to the school district, resulting in the greatest savings to property owners in the district.
For more information, visit https://www.dublin.k12.ca.us.