Plano ISD saves $7 million in refunding deal

The money saved on the bonds comes on the heels of the district issuing $93 million in new debt last month.

PLANO — With school districts across the state strapped for cash, saving every dollar possible is as important as ever.

Plano ISD recently refunded $46.1 million in bonds from the district's 2004 bond package, resulting in a net savings of 14.4 percent in future bond interest payments. The district will save $7.3 million over the life of the bonds, Linda Madden, the district's executive director of finance said.

In December, the school board authorized Madden, as well as the district's advisers from First Southwest, to look into whether the district could save money by refunding. When the timing was right, the district acted and received the savings it desired.

"The parameters resolution set the target we needed to come in at a true interest cost of not more than 4.5 percent," Madden said. "Our timing was great and our underwriters were excellent, and we achieved a 2.42 true interest cost when we went to the market last week."

Madden said the savings were achieved without extending the life of the debt, with the final payment still due in 2029. She said the district hoped to save at least 5 percent of the refunded principal, a number that was easily surpassed with the 14.4 percent savings. Prior to the refunding, the district was paying 4.37 percent interest on the bonds.

The money saved on the bonds comes on the heels of the district issuing $93 million in new debt last month. When the district sold bonds in January, it received an interest rate of 3.26 percent, the lowest it has ever received. At the time, the district credited its AAA bond rating as a key component in it receiving the low rate.

"We timed the market very, very well," Laura Alexander, a senior vice president with First Southwest, told the board at its January meeting. "The strategy seemed to work and we are very pleased with our results. ... The range of the bids was fairly tight. There was more of a cluster in the mid 3.30s, which is probably more indicative of the market. I think the 3.26 means you sold through the market. We were very pleased with the big turnout and the results."

At the January meeting, Alexander said there were not many bonds being issued at the current time, so the district was able to take advantage of a very competitive market to get a low rate. Madden said the same factors that were in play in January came into play when the district refunded its bonds last week, noting that there is not typically a lot of municipal bond activity early in the year, allowing a district with a strong bond rating to be a more attractive investment, resulting in lower rates.