District to Refinance $72 Million in Debt

Taking the recommendations offered by administration officials and the district's financial consultant, the Bethlehem Area School Board voted 8-1 to terminate portion of the district's swap debt and refinance about $72 million in two new bond deals.

Voting against the move was board member Loretta Leeson, who said the $7.8 million in related fees was too high.

But administrators and the district's financial consultant Scott Shearer, of Public Financial Management, said the variable rate offered by bond holder Dexia, affected by unstable foreign markets and debt, has shot up quickly, with the district currently paying more than seven percent.

“The pressures on Dexia are causing us to want to expedite this even more,” Shearer said.

Additionally, the current amount cannot be sustained under the 2011-2012 budget, passed in late June, said district finance chief Stacy Gober.

“It is costing us more and more money,” Gober said. “The more we push this off, the more it's costing the district. It will fix our budgetary dollars as well as move towards our long-term goal (of dumping risk).”

The refinancing deal will reduce the current debt risk by about 50 percent, Shearer said, moving the funds into a fixed rate bond with an interest rate of four percent or less. The remaining portion will be rolled into a new variable-rate bond that will carry the swap.

“If you do this option, it will take your debt to a not perfect, but more balanced level,” he said. “It would take your portfolio down to 10 percent tax risk, and 90 percent no tax risk. There's still more work we need to do, but this is a good mixture.”

Ultimately, the change will cost the district $2.1 million this year, but will save the district $5.6 million over the life of the loan, Shearer said.