Bond Refinancing Lowers Taxpayers' Interest Costs
Property taxpayers in the Foothill-De Anza Community College District will see their collective interest payments drop by an average of $689,312 a year as the result of a recently completed bond refunding.
Similar to refinancing a home mortgage to take advantage of lower interest rates, the refunding of nearly $78 million in outstanding general obligation bonds will result in a total cash flow savings to property owners of about $13.1 million through 2030.
The Board of Trustees authorized the refunding in March and the transaction closed May 3. Despite some fluctuations in interest rates, the results met projections.
"These savings do not contribute to the district's bottom line but they do provide a benefit to taxpayers by reducing their tax bills,'' said board President Joan Barram. "We are happy to be able to do something for property owners who have invested in the district's future by supporting our bonds for capital repairs and replacement buildings at our campuses."
Chancellor Linda Thor said the district will look for future refunding opportunities for additional taxpayer savings.
The district received an Aaa bond rating - the highest possible - from Moody's Investors Service and AA from Standard & Poor's. Purchasers of the refunded Measure E bonds included mutual funds, asset managers, retail investors and insurance companies.
Based on assessed values for 2011-12, the property-tax rate for district bonds for individual taxpayers will drop by 69 cents for each $100,000 of assessed property value as a result of the transaction, with the average tax rate for Measure E bonds now projected at $11.81 per $100,000.
Foothill-De Anza voters overwhelmingly approved Measure E in 1999. The bonds have made it possible for the district to prolong the life of original campus buildings and update aging facilities with modern classrooms and labs that are built for energy efficiency. Bond funds by law cannot be used to pay for academic programs and other operating expenses.
Posted May 12, 2012