At a board meeting Monday, Irving ISD trustees approved a $40 million-dollar refund in existing bonds, saving taxpayers between $5 and $7 million dollars.
“Refunding bonds is similar to refinancing a mortgage where the district calls in bonds issued at an originally higher rate and reissues the bonds at a lower rate,” says Gary Micinski, Chief Financial Officer for Irving ISD. “Hence, the district saves money over the life of the bond by paying less interest.”
When the bonds were issued in 2010, the interest rate was approximately 5.6 percent. The refunding rate is now estimated to be 2.8 percent.
Although the exact savings will not be determined until the final transaction is completed in November, it is estimated the refunding will save taxpayers approximately $7 million over the life of the bond. Because money saved in the future may not have the same value as funds available today, the present value, or estimated value of the potential $7 million savings is estimated to be $5 million.
“The principal of the original debt will not change but taxpayers see a savings by refunding the bonds at today’s lower interest rates versus the higher rates in 2010,” says Micinski. “While a year ago, this transaction may not have been thought to be possible, decreasing interest rates has allowed this transaction to be feasible.”