New Paltz Central School District

Since publishing the last newsletter, the District has been able to initiate the refinancing of nearly $9 Million of existing debt. By taking advantage of this refinancing opportunity, all existing bonds will now be paid off in four years instead of seven, saving the District $960,000 in interest costs. The Board approved this refinancing on February 18, 2015.

“We would have refinanced this debt whether there was a new Capital Project or not, as it results in a savings of almost $1 Million to the District taxpayers,” says Richard Linden, Assistant Superintendent for Business.

The early repayment of the existing debt creates the opportunity to accelerate payments on the bonds for the proposed Capital Project. Under this scenario, the tax levy impact related to the project is still planned as a one-time increase of $20 per $100,000 of assessed value, however, the duration of the bond repayment schedule would decrease, resulting in long-term savings for the taxpayer.

For example, using a conservative 3.5% interest rate, repayment could occur two years sooner than was projected in January, shortening the bond schedule from 20 years to 18 years. This reduces the total cost of debt (principal plus interest) for the new project from $72.6 Million to $70.8 Million, resulting in a savings of $1.8 Million in interest expenses. Although current municipal bond interest rates are significantly lower at this time, the Board used a 3.5% interest rate in its estimates to be conservative, in light of potential interest rate risk.

Should the interest rate ultimately be as low as the current NYSED-published 2.25%, the bond repayment schedule would be further decreased to 16 years, resulting in a total cost of debt (principal plus interest) for the new project to equal $63.6 Million; a net additional savings of  $7.2 Million.

Aside from shortening the repayment schedule, the general concepts of the finance strategy would remain the same as originally envisioned: continuing to make use of retiring debt, State Building Aid, the capital reserve, and the tax levy. Bonds would be secured, as needed, at the completion of work. During the four-year construction period, the District will cover expenses through the use of short-term, low-interest Bond Anticipation Notes (BANS). This allows the District to wait until the conclusion of the project to issue the actual bonds when the final cost is known.

Please remember that by law, the project cannot exceed the $52.9 Million authorized by voters. For this reason, conservative estimates were used to present the taxpayer with a cost that would cover any unexpected increases due to rising interest rates or more expensive bids. If approved, final architectural plans will then be developed and bids will be secured for the work. Upon completion of the work, when the final costs are known, bonds will be secured and interest rates will be known. If the work costs less than estimated, the District will borrow less, in turn the interest charges will be less, and therefore the total cost to the taxpayer will be also be less.

Using these conservative estimates, examples of the tax increases for different assessments are shown below. The lengths of repayment will vary based on the final interest rate secured.