DEARBORN — Dearborn Public Schools has completed the first of two bond refinancings, which will save local taxpayers $4 million over the next several years.
The refinancing was the first of a two-part refinancing approved by the Board of Education earlier this year. Almost $40 million in bonds originally issued in 2014 were refinanced, reducing the district’s total payments by $4 million over the next 11 years. These bonds were originally issued after voters approved the SMART Bond in 2013.
In preparing to sell the bonds, the school district, working with its municipal advisor, PFM Financial Advisors LLC, requested that Moody’s Investors Service, a division of The McGraw-Hill Companies Inc., evaluate the school district’s credit quality. Moody’s assigned the district the underlying rating of A1. The ratings agency cited the district’s stable to growing student enrollment, solid full value per capita, and consecutive operating surpluses that have rebuilt reserves to healthy levels in their rationale for rating the district at this level.
“With the help of careful budgeting and additional funding from the Wayne County RESA millage, Dearborn Schools has been able to rebuild its financial reserves over the last several years,” DPS Business and Operations Executive Director as Wall said. “That helped us get an even better rate for this refinancing, which will save district taxpayers $4 million in the end. The district does not receive any additional operational money in our budget from the refinancing.”
Voter-approved bonds are funded directly through local property taxes. Tax rates to pay the bonds are set based on total property values in the district and the amount needed to make the bond payment. If property values climb more quickly, then the tax rate falls.
For the SMART Bond, voters approved keeping a 5.35 mill tax rate. That rate has since fallen to 3.5 mills as the district paid off old debt and total property values in the district increased. (One mill is $1 of tax for every $1,000 of taxable value.)
This year’s refinancing will not immediately change the current 3.5 mill bond tax rate. The district is laying the groundwork to put another bond question that would maintain the same millage rate before voters in 2022. The new bond would be one of the steps in a long-range infrastructure plan looking to make much needed infrastructure repairs and upgrades, add classroom space, increase security, and possibly fund other large ticket items like buses. Bond money cannot be used for everyday expenses including salaries, utilities or books.
DPS’s recent financing was conducted by the Michigan investment banking office of the brokerage firm Stifel, the municipal advising firm PFM Financial Advisors LLC, and bond counsel Thun Law Firm, P.C. The bonds were sold at an interest rate of 1.73 percent with a final maturity of 2032.
“The Dearborn Schools bonds were well received by the bond market,” Stifel Managing Director Brodie Killian said. “We were able to take advantage of current low fixed interest rates that met the goals of the district and resulted in significant debt service savings.”