The District 65 school board is planning to refinance some of the district’s outstanding bonds to save money for some $189 million in needed facility repairs, it was announced at Monday’s board meeting.
Currently, the district cannot raise money by issuing new bonds because it has essentially maxed out its ability to do so until 2031, according to a memo from district financial adviser Raymond James to the district’s Chief Financial Officer Raphael Obafemi.
That has been the case since 2019, but the district has continued to raise money for capital projects by refinancing its outstanding bonds at a lower interest rate, according to Obafemi and Raymond James Managing Director Elizabeth Hennessy.
With rising inflation over the past year, though, the total cost of necessary school building maintenance repairs is likely “north of $200 million,” Obafemi said at a school board meeting on Monday, April 24.
“We have to get creative with ways of trying to address those facility repair needs,” he told board members at Monday’s meeting. “One of the strategies that we’ve come up with is to look at bonds that are callable, that we can refund, and then refund those bonds and take advantage of the lower interest rate that we can get today compared to when those were issued.”
Currently the bond market is experiencing an inverted yield, which means that interest rates are lower on long-term than short-term bonds, Hennessy and Obafemi explained. That market dynamic gives the district an opportunity to refinance or “refund” bonds from 2013 this year and 2014 next year at a lower interest rate than those bonds were originally issued at, according to Obafemi.
Doing so will afford the district $2.7 million in new money in 2023 and $2.6 million in 2024, Hennessy wrote in her memo to Obafemi. Getting those funds is contingent on the long-term interest rate staying lower than it was in 2013 and 2014, but Obafemi said that he feels “comfortable that we should be able to achieve this.”
In addition, District 65 is looking to boost revenues by collecting more property tax revenue thanks to inflation, which would be used to set aside $6 million in 2023 and another $6 million in 2024 for facility repairs, Obafemi said.
Including the bond refinance savings, the district intends to have nearly $9 million for those capital improvements in each of the next two years, according to Hennessy and Obafemi.
Earlier in Monday’s meeting and during a board committee meeting last week, Jodi Wickersheimer, a parent of three elementary school children, asked the school board and administration for more transparency with the community about the master facilities plan and the allocation of that $9 million both this year and next year.
“The broader plan was shared last February during Cordogan Clark’s presentation, and the details of that have not been made public since then,” Wickersheimer said to the Personnel, Buildings and Grounds and Finance Committee on April 19. “Quite frankly … there is no context for how decisions have been made. The murkiness in the big picture is having two results: first, schools and communities cannot track progress. Secondly, the lack of clarity and transparency is translating to District 65 staff being unresponsive to current needs, so you have parents showing up to talk about operational things.”
Superintendent Devon Horton missed last week’s committee meeting while attending a board vote in DeKalb County, Georgia – when he was hired for a new superintendent job starting July 1 – but he addressed some of Wickersheimer’s concerns at Monday night’s full board meeting.
District 65 is planning to release a full report on its facility upgrades in June, Horton said.
“We are looking at this from the lens of health, life and safety first. That’s really the top priority, and we will put some public documentation together to make sure that everyone is able to see what those things are,” he said. “In some ways, we didn’t necessarily always approach what needs to be repaired properly. We want to make sure we’re doing this in the most meaningful way to so that our buildings can be retained and sustained.”
These types of expenses should be accrued for every year. The failure to do so is a failure of leadership and a failure of oversight from the both CFO and perhaps the district’s accounting firm and investment bank. This strategy of interest rate arbitrage to raise dollars will inevitably run dry. Chief Financial Officer Raphael Obafemi needs to resign.
Once again it fall on the home owners