The Elk River Area School Board approved Monday night refunding approximately $34 million in capital appreciation bonds, which is expected to save taxpayers approximately $4 million in interest over the lifetime of the bonds.
Refunding, which is similar to refinancing a traditional loan, will allow the school district to receive a lower interest rate on the bonds, which were used for capital projects.
“Because interest rates are currently near record low levels, this is a good opportunity to reduce future debt service costs,” said Executive Director of Business Services Randy Anderson. “We are continually monitoring our debt for cost-saving opportunities.”
Anderson added that while this initiative will save taxpayers in the long run, the refunding is not directly tied to the school district’s two upcoming operating levy questions.
“We don’t want taxpayers to get confused or assume that we now have an additional $4 million available at a time when our School Board has two levy questions on the November 6th ballot,” Anderson said. “The refunding focuses on paying off debt for our newer buildings, while the questions focus on bringing needed funding to classrooms.”
Bonds, Anderson said, become “callable” at set intervals, at which time they can be paid off or refinanced.
Refunding is dependent on current market conditions and on meeting the state of Minnesota’s savings threshold requirements.