San José Unified saves taxpayers more than $3.1 million with bond refinancing
FOR IMMEDIATE RELEASE
SAN JOSÉ, CA – On Tuesday, December 5th, San José Unified successfully issued $27.69 million of 2017 General Obligation Refunding Bonds. Through this process, property owners within the district will save more than $3.1 million over the remaining life of the bonds, equal to approximately $2.79 million in present value or 9.45% of bonds refunded.
Refunding bonds, which are similar in purpose to refinancing a home mortgage, pay off existing debt with funds borrowed at lower interest rates. The savings are then passed on to taxpayers in the form of lower property taxes. The bonds were sold at 1.82% interest, considerably lower than the 4.90% average coupon of the refunded bonds. Strong investor demand for the district’s highly-rated bonds resulted in over $285 million in orders, far exceeding the $27.69 million of bonds available. The strong demand provided an opportunity to further reduce yields during the pricing process.
The district’s general obligation bonds are rated Aa1 by Moody’s Investors Service and AA by Standard & Poor’s. These ratings place San José Unified among the top 15% of California school districts, reflecting the district’s strong financial management.
“Timing for the refunding proved critical as municipal bond yields remain near historically low levels and many municipal issuers fear they will lose the ability to advance refund bonds on a tax-exempt basis,” said Blake Boehm of KNN Public Finance, the district’s municipal advisor. The U.S Congress is currently working through tax reform legislation that could eliminate municipal issuers’ ability to advance refund bonds with the pricing benefit of tax-exemption.
“We appreciate the community’s continued support of San José Unified. Maintaining the district’s 3.3 million square feet of facilities benefits our students and our neighborhoods,” said Deputy Superintendent Stephen McMahon. “The positive results of this bond sale reflect the commitment of our Board of Education to effectively manage our bond program and demonstrate strong fiscal stewardship of public funds.”