School District saves $1M on bonds

A favorable interest rate for bonds seems to have resulted in savings for Whitefish School District, and in turn, savings for its taxpayers.

The district sold bonds earlier this month to finance the construction of a new high school. The bonds will have $1.2 million less in interest costs than originally estimated. The low rate means roughly $2 in savings per year for taxpayers.

The bond’s average interest rate is 2.84 percent. When the issue was before voters, estimates put the interest rate at 3.5 percent on the 20-year bond.

“We really feel like we got what was the low interest rate,” Bridget Ekstrom, with D.A. Davidson told the school board June 12.

According to Ekstrom, the interest rates are the lowest overall rates for a Montana school district for bonds for the past several decades. The bonds were sold through D.A. Davidson primarily to local and other Montana banks and individual investors.

Voters approved a $14 million bond. The district plans to split those bonds into two series — one for $10 million this year and a second next year for the remaining $4 million.

“We split it because if the bond is $10 million or under you get a bank-qualified bond and a better interest rate,” Ekstrom said.

The district expects to issue the second bond in January. By issuing the second set in the next calendar year it allows the second bond to also be bank-qualified, keeping interest rates lower. An interest rate of 2.15 percent is predicted for that bond, which will be a 12-year bond.

“We’ll watch rates,” Ekstrom said. “If they trend up and we decide we don’t want to wait we’ll issue the bond.”

As part of the bond financing process, the district received an A-plus credit rating with a stable outlook from Standard & Poor’s rating service. The rating was due to the district’s stable finances, good financial management policies and low debt, according to Ekstrom.

“The A-plus rating was key in getting low interest rates,” Ekstrom said.