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District financial adviser outlines refunding plan that could save taxpayers about $462,000
Summary
Financial adviser John Isom told the Palos Verdes Peninsula Unified board that refunding portions of 2014 and 2016 general obligation bonds could yield roughly $462,000 in collective taxpayer savings if market conditions hold; staff would return with a resolution and parameters for any sale.
John Isom, the district's financial adviser from Isom Advisors, told the Palos Verdes Peninsula Unified School District board that the district can potentially refund portions of its 2014 and 2016 general obligation refunding bonds to lower overall outstanding debt and generate taxpayer savings. "There's about $462,000 in taxpayer savings, kinda depending on our structure," Isom said, noting a net present value estimate of about 4.5 percent under current market conditions.
Isom explained three refunding approaches: level savings (steady reductions each year), deferred savings (pushes savings to the back end to cut later years), and upfront savings (larger short-term relief with taxes reverting later). He said most districts choose level savings. He cautioned that refundings require meeting a net-present-value threshold and that interest-rate swings can change the outcome: "If the net present value percent goes down to 1% or 2%, our recommendation would be don't do it." He told the board typical fees associated with such financings'00 bond counsel, rating agencies, paying agents, underwriters'00 would likely run in the ballpark of $100,000 to $150,000.
Board members asked whether advisory and legal fees would still be paid if the board later decided not to proceed. Isom said fees come out of bond proceeds and that adviser and legal fees are generally covered from proceeds only when a sale occurs. He described competitive and negotiated sale methods and recommended flexibility given the relatively small size and timing-sensitive nature of the refunding. "We're the fiduciary; we represent you," Isom said, describing how his firm will use public market data to seek competitive pricing.
Board members expressed general support for staff preparing a resolution and analyses with parameters such as a minimum NPV threshold (the GFOA guideline is a 3 percent minimum). The board did not take formal action beyond asking staff to prepare a resolution and associated good-faith cost estimates for a future meeting.
What happens next: If the board directs staff to proceed, staff would draft an issuance resolution that sets minimum savings parameters and delegates authority to staff to complete the sale if the market produces acceptable pricing. The board scheduled a budget study session on March 6 to discuss broader fiscal impacts.
