School board plays it safe

In the end, New Hampton School Board members decided to play it safe Monday night when they agreed to sell $9.415 million in bonds this June instead of waiting until the district actually needed the money.
“Honestly, you need to pull out your crystal balls and try to figure out where interest rates are going,” Superintendent Jay Jurrens said, “because there could be downsides to selling in June or waiting.”
The bonds need to be sold as part of the school district’s $19.415 million construction project that includes a new middle school, competition gym and vocational agriculture and industrial technology center.
When voters approved a bond referendum in February 2017, the School Board decided to sell the bonds in two chunks — $10 million last summer and $9.415 million this year — to save on interest costs.
The quandary the board faced Monday was this: The board can sell the bonds in June or delay the sale for three or four months because the district won’t need the money right away. So the question presented to the board was does it incur $50,000 in interest costs by selling the bonds in June or does it take a chance that interest rates go up in the near future.
“That’s a lot of money in interest,” Board Member Nate Schwickerath said, “and I’m not sure I’m comfortable with spending that money when we don’t really need the bonds yet.”
Other board members, though, weren’t so sure.
For every tenth of a percent that rates increase, Jurrens estimated that it would cost the district about $115,000 over the 20-year life of the bonds, and because the Fed usually raises interest rates by a quarter of a percent, that could mean a normal hike in rates equates to a $287,500 hit. If rates, for some reason, were raised by a half of a percentage point, the district would be out $575,000.

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“I think I’d rather know what we’re facing going in instead of taking that chance,” Tim Denner said. “I’d rather be wrong on a $50,000 than on the other way.”
 
For more of this article, see Friday's Tribune.