Scranton SD advisors urge fixing two 2016 taxable series ahead of June 15 tender

Scranton School District budget and finance committee members heard on March 25 from financial advisor Mike Vind and bond counsel Brian Koslansky about options for two taxable series issued in 2016 that face a June 15 tender date.

Vind told the committee the two 2016 series comprise roughly $8.4 million of the district's approximately $218.3 million in outstanding debt. The securities are in a term mode and must either be remarketed for another short term or refinanced and fixed to their final maturity in 2034. "If we do nothing, on June 15th ... there would be a failed remarketing; the bond rate would go to 8%," Vind said, describing the "failed remarketing" penalty the documents prescribe.

Vind ran committee members through an illustrative comparison that assumed market rates fall 50 basis points by 2029. Under those assumptions, a remarketing/tender strategy could produce lower payments in some mid-term years, but it would leave the district exposed to future interest-rate risk and require ongoing remarketing costs. Refinancing and fixing the rate to final maturity would eliminate that risk, Vind said, and would allow the two series to align with the district's other fixed-rate debt.

Bond counsel explained that choosing a tender route requires a shorter administrative resolution (already used historically), while a full refunding would require advertising and a full debt ordinance or resolution and a May board vote to meet the June 15 closing timetable. Chair Katie Goodmarden and committee members directed staff to prepare a refunding resolution for the April work session so the board can consider final approval in May ahead of the tender deadline.

Next steps: staff will prepare documentation for the committee's April work session and present a refunding resolution for board consideration in May; the district must select and close on an option by June 15.