In order to take advantage of historically-low interest rates, the Midlothian ISD board of trustees unanimously approved a parameters bond order to authorize the sale of $120 million remaining from the district’s 2016 bond issue.
At last month’s regular meeting, the board agreed to set limits on the sale. The amount of bonds sold cannot exceed $120 million, the interest rate cannot exceed 4 percent, and the final maturity cannot exceed 30 years.
Josh McLaughlin, a financial advisor with BOK Financial Services, told the board that since 2010, the district has saved taxpayers $68.4 million through strategies such as bond refunding for paying debt off at a lower interest rate, prepayment of bonds prior to final maturity, and using variable-rate bonds to lower the interest cost.
Of that amount, variable-rate bonds alone have resulted in almost $22 million in savings, McLaughlin said. The interest rates on those outstanding bonds are 1.5 percent and 1.83 percent, and part of these bonds will have their interest rates reset in August.
In November, the board refinanced $46.2 million in bonds, and McLaughlin said that move alone saved the district $10 million. Over the last 10 years, he said, the district has refinanced a total of about $190 million in outstanding bonds, saving $32.2 million. The district also prepaid $13.2 million, resulting in $14.3 million more in savings.
At present, MISD has about $338 million in bonds outstanding, of which roughly $293 million is callable prior to final maturity, McLaughlin said.
“We continually look at those bonds each and every year to prepay prior to final maturity if the opportunity is available, or refinance these bonds at a lower interest rate,” he said.
Bond rates are currently at their lowest mark since 1956, McLaughlin said, which makes it an excellent time to sell off remaining bond authorizations.
In the $260 million bond program approved by voters in 2016, the district has held three bond sales at interest rates of 3.94, 1.25 and 4.07 percent. The district has $120 million left from the 2016 bond based on cash flow, and McLaughlin recommended that the district sell all $120 million to capitalize on the low rates. McLaughlin emphasized that there would be no increase in the district’s INS tax rate.
Total property values within the district is just under $4.7 billion, including a $457 million growth in 2019. McLaughlin said he is conservatively projecting $300 million in annual growth over the next three years in order to maintain capacity for any future bond issue, should it be needed.