Board president says further savings could result if interest rates drop in 2022

The Palmyra R-I School District Board closed a refinancing of the Series 2014 Bonds, which will save $1,358,834 in interest expense on March 30.

At a regular meeting of the Palmyra R-I School District Board of Education on Feb. 14, a Refunding Bond Resolution was approved that established a final terms committee consisting of Chuck Keller, Board President; Eric L. Churchwell, Superintendent of Schools; and Larry J. Hart, President and CEO of L.J. Hart & Company. That day, the final terms committee was able to lock in the interest rates for $6 million General Obligation Refunding Bonds at an average interest rate of about 2.74 percent, compared to the remaining Series 2014 Refunded Bonds, which carry an average interest rate of about 4.51 percent. The District reduces the future interest expense by about $1,358,834, which is $29,050 more than what was presented at the Feb. 14 Board of Education.

The refinancing also shortens the final repayment period by two full years from the original Series 2014 Bonds. When the savings of $1,358,834 is combined with the interest avoided on five other refinancings, the total savings reaches $3,888,801 since 1998. Churchwell expressed enthusiasm and support for the refunding option selected by the Board of Education.

“This plan achieves good savings, and provides an opportunity for the District to be in a better situation to present no tax increase building proposals with voter approval,” Churchwell said.

Keller, pointed out that the $1,358,834 of interest savings for the Series 2017 refunding is not all the District may realize due to the Series 2017 Refunding Bonds having a call — or redeem — feature on March 1, 2022 at no penalty.

“If interest rates are lower in 2022 or later, we can take advantage of that. Meanwhile we are locking in these levels that are over one and three-quarters percent (1.75 percent) lower than they were in 2014,” said Keller.

L.J. Hart & Company of St. Louis, Mo. prepared the refunding proposal and Tom J. Pisarkiewicz, Vice President/CFO of the firm, explained how it can fit into the long range plans of the District. Pisarkiewicz mentioned that the three significant factors making the Series 2017 refunding possible were the lower interest rates than in 2014, the fact that the entire $6 million portion of the Series 2014 Bonds are callable on March 1, 2019 at no penalty and the District’s ability to participate in the State of Missouri’s Direct Deposit Program. This program makes it possible for the District to receive an “AA+” rating from Standard & Poor’s Global on the refunding bonds.
Pisarkiewicz complimented Churchwell for his prompt and thorough preparations to supply the data necessary for the rating application and official statement, along with the Board of Education for their foresight in making the Series 2014 callable in five years.

The proceeds from the Series 2017 Refunding Bonds will be placed in an escrow account with the UMB Bank, N.A. and reinvested in U.S. Treasury Securities. The earnings from this escrow account meet the interest payments on the Series 2017 Refunding Bonds through March 1, 2019, and prepay the callable Series 2014 Bonds on March 1, 2019.

The Series 2017 Refunding Bonds were underwritten by L.J. Hart & Company and reoffered to local financial institutions. The HNB National Bank acquired $270,000, HOMEBANK purchased $280,000, and Exchange Bank of Northeast Missouri bought $300,000 of the bonds, which was very helpful to the success of the refinancing. The closing for the Series 2017 Refunding Bond issue occurred on March 30, 2017. Several board members commended Churchwell and L.J. Hart & Company for developing the attractive refunding plan.

“It is nice to be able to save $1,358,834 of our taxpayers’ money for the Series 2017 Bonds and shorten the length of the financing by two full years,” said Roger Sutter, Vice President of the Board of Education.

The legal documents to complete the issuance of the bonds were prepared by Lori Lea Shelley, Esq. of Mickes O’Toole LLC in its role as bond counsel for the District.