Franklin Regional might extend bond repayment to free up $1.8M
Extending payments on debt from 2008 could net Franklin Regional School District officials up to $1.8 million next year — money that administrators have suggested putting away for a rainy day.
The bond is scheduled to be paid off in November 2014, but it requires a $2 million payment this fall.
Instead, financial advisers suggested spreading the remaining $2.6 million balance over seven to nine years.
Doing so would cost the district an additional $110,00 in the long run but enable the district to free up as much as $1.8 million for the next school year.
Superintendent Emery D'Arcangelo and director of finance Jon Perry suggested putting the bulk of that money in the district's capital-reserve fund, which is slated to be significantly drained during the next three years.
Perry said the rationale is that the district essentially could borrow money without applying for a new loan.
“It would leave us a solid three years of spending, and I'm comfortable with that level,” Perry said. “We could need to issue debt in the future; this could push that need away.”
This summer, work is expected to begin on a multiyear, $2.5 million replacement to the middle school heating, ventilating and air conditioning system.
Officials expect the capital-reserve fund to have about $5.4 million at the end of the school year; however, more than $6.7 million in projects are expected during the next five school years.
For the past several years, officials have set aside less money than normal for capital projects.
That's scheduled to change in the 2014-15 school year.
Board member Roberta Cook, who has struggled over decisions to extend debt in the past, said there is logic to Perry's recommendations.
“Sometimes, you have to engage in debt,” Cook said. “I will engage in debt for long-term, capital investments, not to buy groceries, to speak metaphorically. A school does have to have a roof that doesn't leak.”
Last month, officials approved a preliminary budget that included nearly a $1.1 million deficit, which would officials propose to balance with a tax increase.
Perry said he worries that the district — like many across the state — might have difficulty obtaining loans in the future.
State officials recently eliminated a program that reimbursed school districts for borrowing for construction projects.
More concerning to Perry is a proposal that would require districts to claim a portion of the state's pension liability, which totals $30 billion. Perry said that move could affect districts' credit rating.
“Is it wise to wait a year and see what happens (with the retirement fund)?” D'Arcangelo said. “I'm not sure what will happen when the dust settles.”
Board member Paul Scheinert said he understands the advantages to restructuring the bond, which refinanced of $8.75 million of debt that paid for projects at the high school and Sloan Elementary from more than a decade ago.
“If we don't pay this off now, the big advantage is to use the money without taking out new debt that could be more expensive and pay higher interest,” Scheinert said.
“Normally, I'm not inclined to do bond refinancing under any circumstances, but those points … it makes sense.”
Chris Bamber, a senior analyst with Harrisburg-based financial analysts The PFM Group, pegged the cost to refinance at about $110,00.
“There's a million scenarios we can run,” Bamber said.
“The bottom line is, there is some very flexible financing available for the school district.”
Board members have until November to decide what to do with the bond issue.
Daveen Rae Kurutz is a staff writer for Trib Total Media. She can be reached at 412-856-7400, ext. 8627, or firstname.lastname@example.org.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Delmont Council approves bids for paving, storm sewer work
- Volunteers spruce up old Sardis Cemetery in Murrysville
- Council asks for more detail on Delmont library plan
- Franklin Regional moves forward on major technology upgrades
- Export historical group on its own with church acquisition
- Franklin Regional’s proposed budget raises taxes by 1.82 mills