School board moves forward to refinance $22.7 million loan

Ramona Unified School District trustees voted 3-2 to refinance a 2007 loan to take advantage of lower interest rates and to establish level payments of about $2.1 million a year through 2032.

The restructured loan will bring total principal, interest and other costs related to refinancing to about $36 million. Total debt service of the existing loan is $43.9 million. The existing loan called for accelerated annual payments, ending with $3.5 million in 2032.

The district expects to save from $6.5 million to $7.8 million by refinancing. Exact savings will not be known until final documents are signed. Even though payments will be higher than the existing loan for the next four years, the average annual savings is about $462,160, the district’s financial adviser reported.

“Thank you very much to everybody for slogging through this,” Dawn Perfect, school board president, said at the trustees’ April 16 meeting. “I appreciate this. It was technical, complicated, and we have a lot riding on this, so let’s hope we do realize the savings that we are anticipating.”

Dissenting votes came from trustees Bob Stoody and John Rajcic, but for different reasons.

“I would increase the loan and extend the terms, and I think that’s a very sane thing to do, because this district has a lot of needs,” said Rajcic.

Refinancing for more money and a longer period will not affect property taxes, he said.

Stoody, who helped craft the motion that Perfect and trustees Rodger Dohm and Kim Lasley approved, said “the devil was in the details.”

The first trustee to publicly support refinancing in December 2012, Stoody said “for as much as I believe that refunding/refinancing is a good thing for the district, my concern is on achieving full disclosure and contractual safety nets for the district within the documents, to protect the taxpayers and ultimately the students from the result of the confusion that can arise when things are not clear.”

Not all of the changes trustees requested on April 7 were included in the proposed resolution presented last Thursday, he said, and “consequently the board was still having to do ‘napkin math’ during the meeting — just to get an idea of what the total costs were to be — hoping we didn’t miss anything or misinterpret a formula.”

He applauded his colleagues’ “on the spot” changes for fixed costs rather than estimates for financial adviser and for bond and disclosure attorney, and to assure that the refinancing resolution and exhibit of costs of issuance supersede any other document related to the refunding.

The district’s original loan, taken in the form of certificates of participation (COP) in 2004, was for $25 million at a variable rate. The COP and matching money from the state paid for two new schools and improvements at other schools.

In 2007 the district refinanced at fixed interest rates the $24.3 million owed. Of that, the district now owes about $22.7 million, the district’s financial adviser reported.

Costs to issue the new COP are an estimated $175,000. The underwriter fee is not to exceed 1.6 percent of the face value of the 2015 COP. Bond insurance of about $76,000 will be paid only if the insurance provides a net benefit to the costs of refinancing, the approved document states.

The face value of the new COP may be about $27 million, depending on market conditions the day the restructuring closes. It will include the $22.7 million existing COP plus fees and interest owed current investors, said Superintendent Robert Graeff, Ed.D.

The district selected Edward D. Jones & Co., which has an office in Ramona, as underwriter.

Once the district receives approval from rating agencies and underwriters, it will report the final payment schedule to the community.