Holmen board briefed on using Fund 39 cash to defease referendum debt; action set for June 8

Holmen School District officials on May 26 outlined a plan to use roughly $4 million in Fund 39 cash to defease a portion of the district’s outstanding referendum debt, a move staff say would produce multi‑year interest savings and near‑term property‑tax relief.

Executive Director of Finance and Operations Julie Holman introduced the agenda item and turned the presentation over to Eric Cass, director of public finance at PMA Securities. Cass described defeasance as “an escrow or a mechanism to allow the school district to prepay debt prior to having the legal ability to do so,” explaining the escrow account earns interest and makes required payments until securities reach their call dates.

PMA presented three options for excess Fund 39 levy dollars: defeasance (the option under consideration), outright prepayment (not currently possible because the relevant issuances are not yet callable), and investing (restricted by IRS arbitrage rules). Cass said setup costs for a defeasance are roughly $17,000, covering PMA’s fee, bond counsel, an escrow agent and a CPA to verify calculations.

Cass reviewed the district’s outstanding issuances and call dates, noting a portion of an April 2019 issue becomes callable April 1, 2027 (about $7 million callable then), portions of a 2023 issuance are callable in 2030, and a February 2025 issuance carries call features into 2033. PMA’s analysis recommended applying approximately $4 million of available cash to reduce principal on the longest maturity (a $5.165 million balance from the 2044 line), lowering that principal by about $3.99 million.

On the projected outcomes, PMA estimated a net present‑type savings of roughly $2.78 million and annual interest/property‑tax savings of about $160,000 per year starting next year and continuing through 2044. Staff also highlighted a near‑term projected property‑tax reduction of about $1.3 million next year; they emphasized that because the debt was referendum‑approved the savings do not immediately create additional discretionary district revenue.

No substantive questions were raised by trustees during the presentation. Holmen staff told the board a resolution to implement the defeasance would be brought back for formal action on June 8.

The board took no vote on defeasance at the May 26 meeting; it will be asked to act on the resolution at the June 8 meeting.