Tacoma Public Schools saves $45 million for taxpayers in COVID-impacted bond market
Tacoma Public Schools saved taxpayers $45 million when the district refinanced its school construction bonds last month.
Rosalind Medina, chief financial officer for the district, said the savings was almost “an unheard of number.”
“I can’t even fathom that we’ve been able to save that much, but it’s an incredible success for our taxpayers,” Medina said at a board meeting last month
Tacoma Public Schools officials began talks in January to refinance its school construction bonds. They didn’t know at the time that a global pandemic would lead to a volatile market.
“When COVID hit, we had that weird little jog of rates, and we thought, ‘Oh no, did we miss our window of opportunity?’ And the answer is no, we actually have been put in a better position with the way the market has recovered so quickly,” Medina said.
Tacoma taxpayers passed a school construction bond in 2013 for $500 million to replace or renovate 14 schools. The bonds were sold in 2014 and 2015.
The sale was made in the taxable market rather than the tax-exempt market. School districts mostly work in the tax-exempt market because interest rates are typically lower, but the taxable market was showing historical lows in interest rates, Medina said.
TPS sold $366 million in bonds with an interest rate of 2 percent on July 8, a present savings value of $45 million. The refinancing will save Tacoma taxpayers several million dollars per year for the next 20 years.
The savings means the district will not have to tax $45 million over the course of the bond repayment, meaning lower future tax collections.
The current tax rate is $5.02 cents per $1,000 assessed value. Next year, that rate is expected to decrease to $4.81 cents per $1,000 assessed value.
Medina clarified the savings don’t impact the district’s operating fund.
“This has nothing to do with whether we’re going to get to build more buildings, or anything like that, or whether we get to buy more staff or more resources — we won’t be able to use it for that,” she said.
Tacoma still has to go to sale this fall for bonds that were passed by voters earlier this year totaling $535 million to replace or renovate eight schools and upgrade safety and facility enhancements in schools district-wide.
Mark Prussing, a public finance specialist for Educational Service District 112, has helped districts through refunding their bonds for years, although he hasn’t worked with Tacoma before. He says districts try to reach between 3-5 percent present value savings when refinancing bonds.
Prussing said Tacoma’s savings of roughly 15 percent was one of the largest he’s seen for a school district in the state.
“It was not a bad deal for Tacoma,” he said.
Tacoma is not the only district that refinanced its bonds during the pandemic. Bethel School District took advantage of low interest rates in May, with a savings for taxpayers of $5.3 million.
Billy Wessell, the district’s chief financial officer, said the interest rates on the bonds reached near historic lows at the time of sale.
“This is money that will now stay in our community and local economy, rather than go to pay interest on outstanding bonds,” said Bethel superintendent Tom Seigel on the district’s website. “The savings will also help the district promote future tax rate stability as it sells the remaining bonds approved by voters in 2019.”
