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Woodland Hills hears refinancing plan to save district money and fund Wilkins roof
Summary
Financial adviser Joe Muscatello told the school board the district could refund the 2018 bond series to realize roughly $2.5 million in savings under current rates and use proceeds to help pay for the estimated $2 million Wilkins roof project; board members pressed for timing, rating costs and contingency plans if markets shift.
Joe Muscatello, a representative of Stifel Nicolaus, told the Woodland Hills School District board that the district—s 2018 bond series (about $43.88 million outstanding) is a candidate for refunding and could yield significant budgetary savings. "We did the original new money issues for your projects, and now we're back with the refinancing. I always like coming back with the refinancing because we're giving you something back here in terms of, savings," Muscatello said during the meeting.
Muscatello said the district currently pays roughly $8.8 million a year in debt service and that the 2018 series carries coupons in the 4–5% range. At present municipal-market levels, the district could refund the 2018 series without increasing the annual debt-service levy and would realize roughly $2.5 million in aggregate savings, with the timing contingent on market movements and a call date. He noted the sensitivity of that estimate: a 25-basis-point fall in rates could raise the savings toward $3.5 million while a 25-basis-point rise could shrink it toward $1.4 million.
Board members asked practical questions about when rates could be locked, rating fees and whether municipal bond insurance should be purchased. Muscatello said ratings by Standard & Poor's or Moody's carry fees that the district would incur once it asks for a rating and that the district should be cautious about beginning rating work until savings are sufficiently likely; if the rating work is done and markets worsen, the district could still incur roughly $30,000 in rating costs without realizing savings.
Muscatello and board members also discussed Pennsylvania—s Act 85 — the state mechanism that will pay debt service when the state has no enacted budget — and recalled a recent episode when Act 85 was invoked late and the district had to temporarily carry a $7 million payment before state action. Board members said that risk weighed into the decision of when to move.
The board discussed applying any refinancing savings to capital needs. The Wilkins roof was estimated in the meeting at a little over $2 million, with a $1 million grant already pledged; Muscatello outlined how a refinancing structure could either reduce annual debt service or provide upfront proceeds to pay projects but emphasized that upfront proceeds carry stipulations if taken as bond proceeds. The potential incremental borrowing to fund the remainder of the Wilkins roof was estimated in the presentation to add roughly $83,000 a year in debt-service cost for a $1.2 million borrow.
No binding vote occurred at the meeting. Trustees instructed staff to continue monitoring the market, to update the business office regularly as pricing approaches the district—s call date, and to return to the board before locking rates or procuring ratings.
