Thursday Oct 09 2008
School district gets positive financial news
By: Brandon Darnell The News Messenger
Western Placer able to restructure its debt at lower-than-expected rates
“On a day when the Dow falls 500 points, very few people get good financial news. Western Placer (Unified School District) is the exception,” said Jeff Small of the Capitol Public Finance Group at the school board meeting Tuesday. The district had taken out five Certificates of Participation – which had variable interest rates – from 2003 to 2006. Small announced that a debt restructuring plan had been completed in which the district was able to convert the variable-interest rate debt to fixed-rate debt at lower-than-expected rates. “There are a lot of districts and agencies in trouble, but Western Placer is not one of them,” Small said. The goal had been to negotiate interest rates at approximately 6 percent, but rates of 5 and 5 ¼ percent over 40-year periods were negotiated, meaning that the district is largely out of the financial problems it faced as recently as last year. Small called the rates “really low” and said that the timing was perfect. The negotiations came after the district received an upgrade in its credit rating and just before the current financial crisis. “You wouldn’t be able to sell them today,” Small said. “It’s good to celebrate today, but ongoing debt maintenance is required.” Tuesday’s announcement was the culmination of an effort that Superintendent Scott Leaman said went back to November. Small attributed much of the successful negotiations to the actions taken by the board in at that time. “The news tonight is wonderful,” Leaman said. “We wish the debt wasn’t there to begin with, but coming up with a maintenance plan is stellar.” Leaman said that one of the things he and the current board inherited was an understanding that the General Fund would be impacted by the debt. Small presented graphics that showed, under the original debt structure, that the General Fund would have been impacted to the tune of $4 million by 2012 — and that is significant when only $45 million is available. Under the new plan, if no growth is experienced, the impact on the General Fund will be $1.9 million annually, starting in 2022. Small pointed out that the budget will probably double in that time, making the impact an annoyance rather than a catastrophe. “I don’t think people understand how huge the need was … and how fast action was taken … to put us in this position,” board member Paul Long said. “In the future, we will not be doing any more COPs,” said board President Paul Carras, to resounding agreement from the other board members.