District to refinance pension liability
by Sue Mroz of The Review staff
PLYMOUTH – The School District has an opportunity to save approximately $89,000 by refinancing a pension liability and has taken the first steps to do so.
School Board members voted unanimously at Tuesday’s monthly meeting to engage the services of RW Baird & Co. to seek bids on a $1.43 million taxable general obligation bond issue, to refinance the district’s obligation with Wisconsin State Trust Fund, for a prior service liability.
Through this vote, board members directed the administration to work with financial planners at RW Baird & Co. to seek bids to issue municipal bonds to address the district’s prior service liability with Wisconsin Retirement System.
With current, low interest rates and a positive bond rating, there is the potential for a savings estimated at $89,000 or more over the 11-year life of the loan.
According to Jon Miller, the district’s manager of business services, in 2007, the Plymouth School District borrowed approximately $1.6 million from the Wisconsin State Land Trust Fund to refinance its liability with the Wisconsin Retirement System. The rate of interest on that loan is 8 percent.
“This liability was placed on all school districts in Wisconsin about 20 years ago, when the State Teachers’ Retirement System merged with the Wisconsin Retirement System,” Miller noted. “At that time, a liability was placed on each school district.”
The school district still owes $1.43 million on its loan, and currently interest rates have fallen sharply, so district officials want to take advantage of the lower rates. The amount the district could save is subject to the bond bid.
“It could be about $6,000 to $10,000 per year,” Miller noted.
The School Board will hold a special meeting on Feb. 8, in conjunction with a meeting of the Committee of the Whole, to vote on awarding the bonds – locking in the lower interest rate.
Lisa Voisin, director of RW Baird & Co., was present at Tuesday’s meeting to discuss the issue.
“Interest rates have plummeted,” she said. “The district can lock in lower interest rates with municipal bonds.
“There is volatility in the market each day and at different times during the day. We lock in the lowest rates of the day.”
Voisin commended the school district for its A bond rating, which it received six weeks ago.
Miller listed some of the factors that impact the bond rating, with a higher rating resulting in more savings to the school district. Among these are:
. Enrollment trends. . Financial stability of the school district. . Methods district officials employ for forecasting future enrollment. . The amount of debt the city of Plymouth has. “We want the bond rating in place, before we go to market,” Voisin said. Board member Pam Holzhaeuser asked Voisin what the interest rate is based upon. “The U.S. Treasury market,” Voisin answered. Board President Mark Rhyan asked Voisin if there is a downside to the action the board is considering.
“If you lock in a bond rating in municipal bonds, you can’t pre-pay them,” Voisin said.
Rhyan informed fellow board members that in the event the district were to have a fund balance, district officials could invest the pre-payment funds and set the money aside, then use that to help pay off the loan.
In other business Tuesday, board members voted unanimously to appoint Dale Miller to a three-year term on the Plymouth Education Foundation Board of Directors.
In another unanimous action, the board voted to accept with regrets the resignation of Nancy Nonnweiler, Plymouth High School attendance secretary. She is retiring after 31 years of service to the school district.
Superintendent Clark Reinke expressed the district’s gratitude to Nonnweiler for her long-term service to the district.
