The Altoona Area School District recently refinanced a bond series of $46 million for a net interest savings of more than $2 million.
The district's favorable A-plus credit rating achieved by years of good financial management, a Standard and Poor's rating services report stated, is one reason the district was able to reduce the original 4.36 percent interest rate and obtain the savings.
Market conditions providing 40-year low bond interest rates were another reason.
"The savings are higher than the estimate we had in September," Business Manager Michelle Krebs said.
The only ratings above A-plus are AA and AAA.
The school board passed a resolution in September to replace the 2008 bond issue with a 2013 bond issue with a lower interest rate.
The district earned a favorable credit rating to attract buyers for the bonds, which were originally issued to borrow money for construction, including the junior high school.
Krebs and Superintendent Dennis Murray had been communicating with investment bankers Boening and Scattergood about when to refinance.
"Since September, rates went up - then back down. We thought, 'Let's do it now,'" Krebs said.
The district's financial strengths include achieving budget surpluses during the past four years that increased the total general fund balance to $38 million in 2011 - a majority of which has been committed to future retirement costs, capital improvement, transportation, federal funds and asbestos removal, according to the S&P report.
The report stated the district's strengths are offset by a limited local economy and low wealth levels on a market value per capita basis.
"Additional financial flexibility is available in the debt service and capital projects funds, which had a combined balance of $20 million at the end of fiscal 2011," the report stated.
The district's anticipated debt service after state reimbursements of $51 million.
"We will put it [the $2 million in interest savings] against our debt service," Murray said. "What is so significant is the fact that the bond series wasn't callable until 2015. We couldn't do anything with them."
To get around that, the district set up an escrow account and made void the 2008 bonds, he said.
"We refused to wait until 2015. The taxpayers saved $2.1 million," Murray said. "We are fortunate we jumped into the market when we did."
Mirror Staff Writer Russ O'Reilly is at 946-7435
