MENLO PARK CITY SCHOOL DISTRICT RECEIVES FIRST IN THE STATE “Aaa” RATING AND SAVES ITS TAXPAYERS OVER $12 MILLION IN BOND REFINANCING
MENLO PARK— Moody’s Investors Service upgraded the Menlo Park City School District’s underlying long-term debt rating to its highest possible rating of “Aaa” on October 22, 2015.
Menlo Park City School District is now the only school district in California to have both a “Aaa” rating from Moody’s and a “AAA” rating from Standard and Poor’s.
Utilizing these perfect ratings, the District saved property owners in the District more than $12 million by refunding its general obligation bonds sold in 2005, 2008 and 2010.
The district on Tuesday, October 27, 2015 sold $31.94 million of General Obligation Refunding Bonds, the proceeds of which were used to pay off a portion of the original bonds. The results were $12.47 million in savings over the life of the bonds ($6.17 million in present value savings). These savings are passed on to taxpayers in the form of lower property taxes.
The refunded 2008 and 2010 bonds were capital appreciation bonds (“CABs”) which compounded interest until their maturity dates. The initial value of these CABs was $14.1 million at the time they were issued. Unlike nearly all other CABs issued by California school districts in the 2000s, the District’s 2008 and 2010 bonds were issued with the ability to be refinanced in the future. By exercising the option to refinance those CABs now, the District has saved its taxpayers $11.57 million. The remainder of the savings come from the refinancing the Series 2005 Current Interest Bonds.
“The Board takes its fiduciary responsibility to our highly supportive community very seriously,” said Superintendent Dr. Maurice Ghysels. “With this action the Board reaffirmed its commitment to maintaining sound public finances for our District and our community.” “Our community has supported us time and again. We owe it to our taxpayers to lower the burden whenever possible,” said School Board member Terry Thygesen. “When market conditions allowed us to significantly lower the interest rate, our Board did not hesitate to pursue the opportunity.”
The refunding, which is similar to refinancing a home mortgage, pays off existing debt by borrowing money at a lower interest rate. The new bonds were sold at an overall interest rate of 4.06 percent which was nearly 2.0 percent less than the 5.97 percent interest rate on the combined 2005, 2008 and 2010 bonds.
The District’s finance team included Keygent LLC as Financial Advisor, Raymond James and Associates as underwriter and Orrick, Herrington & Sutcliffe LLP served as Bond and Disclosure Counsel for the transaction.