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Even before the COVID-19 pandemic hit last spring, members of the Vandalia Board of Education discussed restructuring the district’s bond debt.
The idea behind restructuring the bonds without impacting residents’ property taxes was to address some much-needed building projects.
As the pandemic continued, that action made a lot more sense.
Last Tuesday, the school board approved the issuance of $325,000 of taxable general obligation refunding school bonds and approximately $3.705 million of general obligation bonds.
The sale included $1 million in new bonds.
At last week’s meeting, Kevin Heid of Stifel, an investment banking company, told board members, “All the bonds were sold. We ended up with an all in total interest costs for the combined taxable and tax-exempt bonds of about 1.97 percent.
“The present value savings on the refinancing, even though some of those bonds had to be refinanced taxably, we still ended up saving about just under $95,000,” Heid said.
“So, I think it worked out very well for the district,” he said.
All of the district’s existing bonds, he said, could not be refinanced at his time, explaining that in 2024, bonds in the 2016 series could be refinanced.
“At that point, we’ll probably want to refinance those to keep the tax rate at that same level you have it now,” Heid said.
The restricting of the district’s bond debt allows it to address a number of building projects without increasing property taxes.
Those building projects, listed by bid package are:
• Vandalia Elementary School bathroom renovations and high school south bathroom renovations – $225,000.
• High school and junior high chiller replacements, and junior high pump replacement/filters – $172,000.
• VES HVAC AHU/fan replacement and insulation replacement in the gym – $490,000.
• Junior high rooftop unit replacement, and HVAC at the Okaw Area Vocational Center for auto mechanics and west side, which includes the kitchen area – $270,000.
Individual proposals include: corridor floor tile replacement, resurfacing of junior high gym floor, high school gym west side steps, resurfacing of the high school parking lot and windows at the vocational center, with the total being $140,000.
Joe Schaal, chairman of the board’s finance committee, said that he and three board members – Kevin Satterthwaite, Adam Braun and Ryan Lewis – who were elected in April 2019 started discussions on “decreasing our debt load, especially with our bonds.”
Schaal, who serves with John Campbell and Satterthwaite on the finance committee, said that the board was anticipating $700,000-$750,000 in revenue from the 1-percent sales tax that was approved by county residents in April.
The plan was to apply half of the sales tax revenue to the district’s debt service.
Prior to pandemic, he said, the board was looking at decreasing its debt payoff from 12 years to seven years.
Once the pandemic hit, Schaal said, the board refocused on the bond debt issue.
“It was apparent that space (in district buildings) or (condition of) buildings was an issue,” he said.
“So, we looked at restructuring in a different way,” Schaal said.
“We will get a million dollars to do immediate work, and we also lowered some of our bonds down to a lower rate,” he said.
Schaal likened the board’s decision to restructure its bond debt to what many homeowners have been doing during the pandemic.
“It’s the same as everybody refinancing their home loans at this time, to get some of their debt to a lower rate,” he said.
Schaal said lowering the bond payments allow the district to address needs at its buildings.
“Now, we’re going to refocus our attention to making those improvements before 2024, when we can restructure our bond debt again,” he said.
“Hopefully, by that time, we’ve made all of the improvements that we can. The goal is to then we allocate more funds back to the bond debt, to pay those off in a more timely fashion,” Schaal said.
Before the pandemic, he said, the district administration and board had a list of capital projects, “but it wasn’t as extensive as it was after the board’s building committee did a walk-through of our buildings with our engineer (VCHS grad Mark Ritter).
“Instead of the $4 million or $5 million that we originally anticipated, it (list of capital projects) grew to $6 million or $7 million,” Schaal said.
Capital projects were going to happen even prior to the pandemic and bond restructuring, he said, but now, “we’re in a much better position financially,” Schaal said.
“And, we’re doing this all while lowering the burden of the taxpayers.
doesn’t get talked about a whole lot is, as long as we can keep improving the properties, keep passing a budget that we can adhere to and not raise property taxes, I think we’re doing what we promised we would do,” he said.
The school district, Schaal said, “just needs to get to the point where we’re not having to continually fix everything but proactively improving things.”
The district is addressing projects that have been needed for some time, things that it could not take on due to budget constraints.
“The focus was always to reduce the debt load,” he said.
“If you look at the school district, as a business, you’re a lot more flexible when you’re operating not so much the read that we were, and we still are,” Schaal said.
“We need to be in a better financial position, although I think we’ve improved over the last two years, even going through the pandemic.
“The problem going forward with our planning is what state aid will be available going forward in the next year or two. Are they going to cut our state aid or are they not? “But we’re in a better position now after restructuring these bonds to better prepare for that,” Schaal said.
While the bond revenue is to be used solely for capital projects, shortages in state aid, he said, will give the district more flexibility overall.
“We’re still in a better position for planning without having to go to John Q. Taxpayer,” Schaal said.