Trustees primed to refinance 2007 loan

Ramona school district trustees tonight will consider a resolution that could save the district about $7.8 million on a loan a previous board refinanced in 2007.

If the district does nothing, it faces escalating loan payments through 2032, when its final payment will be $3.46 million. No action means the district will pay $43.9 million between now and 2032 on $25 million borrowed in 2004 in the form of certificates of participation (COPs) for facility improvements.

Interested in taking advantage of today’s lower interest rates, trustees are discussing refinancing options. At a special meeting last Tuesday they reviewed three options with financial adviser Jon Isom of Urban Futures. By the end of the two-hour and 15-minute session, three of the five trustees said they favor Option 2, level payments of $2.1 million a year through 2032. It will mean higher payments than required of the existing loan for the next four years, but thereafter payments will be less.

Whichever option the district selects, it will be trading “expensive bonds — capital appreciation certificates with compounding interest — for the cheapest kind of bonds, which are current interest bonds,” said Isom. “...Any time you do a refunding, the primary objective is lower the cost of borrowing, period.”

Trustee John Rajcic said he prefers extending the length of the loan because of inflation and so today’s students don’t suffer.

“I’m just the opposite,” said trustee Bob Stoody. “I believe that it’s wrong to put the debt on the children in 2032 for something that they don’t get.”

The 2004 loan and matching state funds paid for two new schools and improvements at other schools, including a two-story building at the middle school.

Teacher Ken Scheib, a member of the Ramona Teachers Association negotiation team, encouraged trustees to postpone refinancing, saying he’s not convinced the economy is improving, interest rates could continue to fall, and no one knows how education will be funded in the future.

“There are plenty of things that need to be done in the district,” he said, commenting that he was in a meeting room that leaked about a month ago.

Teacher Cori McDonald, teachers union president, agreed but said, “I understand there’s arguments for all of these, and I applaud that you guys are looking into all the different options.”

Dawn Perfect, board president, prefers the option that has escalating payments, but because of lower interest rates represents savings of about $360,000 a year compared to the current loan — “just because I don’t want to see increased payments for these upcoming four years...I’m more comfortable with Option 1, but I won’t object to Option 2.”

Stoody and trustees Rodger Dohm and Kim Lasley indicated a preference for Option 2.

The resolution is item E-1 on the trustees’ April 16 agenda, available online at www.ramonausd.net. The meeting is scheduled to start at 7 p.m. in the Wilson Administrative Center Board Room, 720 Ninth St.