A favorable bond market coupled with some deft financial maneuvering is going to allow the Corbin Independent School system to save an estimated $578,998 on bonds it issued in 2007 to fund the construction of Corbin Primary School.
The good news came during a meeting of the school district’s Board of Education, held at Corbin High School last Thursday.
Dr. Robert Tarvin, a financial advisor from Ross, Sinclaire & Associates, told board members that a drop in the average interest of the bonds from 4 percent to 2.55 percent would result in the huge savings once a “bond refund” is completed.
Tarvin said the Kentucky Department of Education allows school districts to conduct these transactions if the savings on the original principal amount is at least 5 percent.
“I always like to tell boards it’s nothing mysterious, it’s like refinancing your house,” Tarvin said. “Basically, we sell that bond and we take the money and pay off the old bond.”
He further explained that unlike refinancing a home, the term of the bonds couldn’t be extended. The bonds issued to build Corbin Primary School would be paid off in 2027.
Under the old bond rates, the school district would have paid $14,183,800. The new bonds, which should be issued this week, will cost the district only $13,604,803.
Before a vote on the issue, board members Todd Childers asked if the move would have any impact on offers of assistance from the state to construct a new Corbin Middle School. Tarvin assured the board it would not.
A draft budget for the 2016-2017 fiscal year was provided to board members. The budget kept most General Fund revenues at or near the same amounts as the current budget year. No salary increases were figured in with the exception of those required for rank and years of experience.
The draft forecasts nearly $13 million in state SEEK funds, but the number is based on current year allocation. It includes bond payments of $2.2 million and allows for the purchase of a bus.
Estimated carryover from the current budget year is just over $2 million. Next year’s budget includes a 5.8 percent contingency, which is approximately $1,352,165. The current year’s contingency is 4.9 percent. The state requirement is 2 percent, with a recommendation of 5 percent.
A tentative budget will be presented to the board in May with much clearer funding projections included.