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Community Corner

Northville Public Schools sale of refunding bonds results in savings for taxpayers

Northville Public Schools will save taxpayers just over $1 million, and make lower debt payments after the successful sale of its 2014 refunding bonds in the amount of $13.28 million. The Board of Education will adopt a ratifying resolution for the bond purchasing agreement at its regular meeting on Tuesday, July 8, 2014. Northville Public Schools will have slightly lower debt service payments beginning in 2016, and taxpayers will notice a lower school debt millage in their tax bills beginning that same year.

Bond refunding is similar to a homeowner refinancing a mortgage to exchange high cost debt for low cost debt. The district is taking advantage of the current historically low long-term interest rates to issue the refunding bonds. The new bonds will be used to refund a portion of the school district’s outstanding 2005 refunding bonds and to pay for the cost of issuing the bonds.

In preparing to sell the 2014 refunding bonds, the school district, working with financial advisor Stauder, Barch & Associates, Inc., requested that Moody’s Investors Service evaluate the school district’s credit quality. As a result of that evaluation, Moody’s upgraded Northville Public Schools underlying rating to “Aa3” from A1, citing the school district’s sizable tax base, manageable debt burden, growing enrollment and strong financial operations.

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“Our district is able to sell these bonds because of our outstanding credit rating of ‘Aa3’ assigned by Moody’s,” said Northville Superintendent Mary Kay Gallagher. “At the same time, the refunding bonds will translate into real savings for school district residents. During these continued challenging financial times for our state and our schools, one of the primary goals of our Board of Education is to look for ways to achieve long-term savings without impacting the outstanding educational programs and services we offer our students.”

This is the third time in four years that the district has taken advantage of historically low long-term interest rates to issue refunding bonds. In August 2011, the Board of Education approved a bond purchasing agreement to redeem the $5.6 million remaining from a $27.5 million bond proposal approved by voters in 2001. The move saved tax payers nearly $275,000. In October 2012, the Board approved a bond purchasing agreement to redeem the $21.9 million in principal remaining from a $35.7 million bond proposal approved by voters in 2004, saving taxpayers $2.2 million.

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The financing of the most recent Northville Public Schools refunding bonds was conducted by the Michigan investment banking office of the brokerage firm, Stifel; the financial advising firm Stauder, Barch & Associates, Inc.; and the law firm serving as bond counsel Thrun Law Firm, P.C. The school district’s 2014 refunding bonds were sold at a true interest rate of 1.04 percent with a final maturity of 2018.

“Northville Public Schools bonds were well received by the bond market,” said Stifel Managing Director Brenda Voutyras. “We saw strong demand and were able to take advantage of historically low rates that resulted in a very nice savings for the district’s taxpayers.”

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