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The Ravenna School District and property owners in the district are getting a special gift for Christmas, and district officials went all the way to Chicago to get it.
Thanks to a new, high credit rating, the district was able to "refund" or refinance, $6.5 million in debt related to the district's new high school. The move cut the interest on the bond issue in half, and will save $662,000 over the life of the loan.
Taxpayers will save money, too, directly, Treasurer Phillip Butto said, but probably not until 2014.
"It is a direct savings to our taxpayers," Superintendent Dennis Honkala said.
In 2006, voters approved a bond issue for the new high school, with assistance from the Ohio Schools Facilities Commission. At that time, the district did not have its own credit rating and used the state's, which resulted in a higher interest rate. The district was paying 5 percent interest on the bonds.
When interest rates started to go down, Honkala and Butto decided to take their request for a better bond rating on the road.
The two went to Chicago to make their case before Moody's Investors Service for a better credit rating, knowing that the better the rating, the more money the district would save.
Honkala said the district made its case based on sound management practices in the district and decisions it had made, such as the recent plan to close Tappan Elementary School next year, closing the preschool last year, and the deal with the Portage County Port Authority to redevelop the old high school site.
"We proved we're doing a pretty good job," he said.
The district received an A2 rating. Butto noted that some other districts in similar circumstances had received a B rating, and Ravenna knew that would have resulted in much higher interest.
Based on that rating, the district refunded $6.5 million of its debt, with an interest rate of 2.5 percent. Since only $8 million in bonds may be refunded per calendar year, the district plans to sell another $5.5 million in bonds for the second round of the refunding project in February. After those bonds are sold, Butto said, the district will have a better idea of how much the average homeowner will save.
Honkala noted that both he and Butto had presented before Moody's at their previous districts, which both had debt for building projects. Both districts also realized savings as a result of the better credit rating, he said.
"When you are able to save hundreds of thousands in savings, it's worth it," Honkala said. "We knew if we could achieve a better credit rating, it would pay off.
Butto noted that interest rates are already starting to climb, meaning the interest rate for the remaining debt probably won't be as favorable. He noted that the rate is fixed, and it is very unlikely the district would refinance the project again.
Contact this reporter at 330-298-1139