Princeton taxpayers realized nearly $5 million in savings on the sale of $29.95 million in bonds that will be used to finance the building of a new elementary school and other districtwide upgrades.
That was the word at a special meeting of the Princeton Board of Education on Monday, June 30.
The bonds were purchased by Piper Jaffray & Co. of Minneapolis at an interest rate of 3.433 percent. Piper Jaffray was one of six financial companies that bid on the Princeton bonds, said Jodie Zesbaugh, with the school district’s financial adviser, Ehlers Inc.
“We had great results,” Zesbaugh said.
“We were able to get in on low interest rates that were better than we expected,” she said.
Prior to the May 20 election, when a referendum was approved by voters, the firm estimated the school district would receive an interest rate of around 4.45 percent.
“The impact on taxpayers was down even lower than we estimated on June 3,” Zesbaugh said. On June 3 Ehlers estimated an interest rate of 3.62 percent.
At election time, it was estimated that the cost of the bonds, plus interest, would be $50.48 million. According to Ehlers, the actual cost, tabulated after the bond sale is $45.71 million — a reduction of $4.777 million.
The sale will close in about three weeks, on July 24, at which time the school district will have cash in hand to begin the school projects.
School Board Member Craig Johnson made the motion to approve the bond sale. The motion was seconded by Eric Minks.
During a discussion opportunity, School Board Member Chuck Nagle questioned if it was wise to issue all the bonds at once. Nagle suggested that because all the money to build a school is not needed right now, it might be wise to issue the bonds in increments so the district could capitalize on potentially even lower interest rates.
Gary Olsen, a senior financial adviser and an Ehlers vice president, said that under such a plan, the district would face a potential market risk if rates increased instead of decreased.
“You could see higher borrowing costs that would offset the savings,” Larsen said.
The Princeton School District got a great rate, Larsen said.
“Historically speaking, it’s a nice, low rate,” he said.
Johnson, Minks and Board Chairman Deb Ulm voted in favor of issuing the bonds. Nagle abstained. School Board Members Howard Vaillancourt, Chad Young and Jeremy Miller were not present.