Carlisle Area School District will use a bank note to refinance almost $7 million in 2012 bonds for an anticipated savings of $101,000 in interest payments.
School board members Dec. 21 voted 9-0 to authorize staff and board leaders to execute all the necessary documents to complete the issuance of debt through First National Bank.
The board on Nov. 16 approved documents to refinance $6,985,000 in Series A bonds through a new bond issue. The 2012 bonds paid for the expansion and renovation of the Lamberton and Wilson middle schools.
Following the November decision, the district went out on the tax-exempt bond market to try and sell the 2012 bonds at a competitive rate for a target threshold of savings of about $130,000 in interest payments, said Shawn Farr, district director of finance.
However, the federal tax reform effort and its different proposals prompted some tax-exempt entities to rush to complete bond issues by Dec. 31, Farr said. He said the proposals created such disruption and uncertainty in the market that the projected savings for Carlisle began to erode and disappear as the rates increased.
“We had previously gone out to do RFPs [requests for proposals] for bank loan rates,” Farr said. But at the time those rates also failed to generate sufficient savings. The district then approached First National Bank, which will be the district’s primary bank effective Jan. 1.
“They came back with a rate of 1.9 percent,” Farr said.
There are six more years of interest and principle payments before the Series A of 2012 is paid off. The first two years carry interest rates of 1.4 percent and 1.7 percent, both under the 1.9 percent in the bank note.
Without the bank note, the interest rate on the Series A bonds would increase to 2 percent in the third remaining year and up to 2.45 percent in the final year. By approving the bank note, the board is refinancing the last four years of the Series A bonds.
“We are trying to squeeze out all the savings we can,” Farr said.
Still the projected savings, even under the bank note, come out short of the initial goal of $130,000.
The board Dec. 21 voted unanimously to pass an amendment to the debt resolution they adopted on Nov. 16. This cleared the way for the district to pursue the bank note as an alternative.