Ruth Alahydoian, Vice President KNN Public Finance:
The call features for the Piedmont USD Series E bonds are in the section on “Redemption” starting on page 5 of the Official Statement and also in Appendix I for two specific maturities. As Connie mentioned, the amount necessary to refund the bonds depends on when they are called. “Optional Redemption” means it is up to the District to determine when or if to call (or refund) the bonds. Current State law only allows a refunding if the repayment (or debt service) on the new refunding bonds are less than the repayment on the existing bonds, creating “savings”. If and when the District determines that the savings from refunding are sufficient, they can refund the Series E. If the refunding is prior to the call date, the refunding is considered an “advance” refunding. IRS rules only allow one “advance” refunding for the life of the original series of bonds, which is why the district must weigh the pluses and minuses of a refunding, even if there will be savings.
Based on the Official Statement of the Series E CAB: http://HariTitan.com/A_0007.pdf
- The earliest redemption is August 1, 2023.
- Using the accretion rates listed in the Maturity Schedule and Appendix I, a full redemption on August 1, 2023 would require just over $25 million in the face value of a refunding (refinancing) bond.
Refunding Series E with a higher face value bond would likely trigger the need for a new voter authorized bond measure.
If we were to refund Series E in 2023, the bonding capacity would reduce by $13 million (= $25 million - $12 million).
However the total repayments (i.e. bond servicing property taxes) would drop from $64 million to $40 million for a 25-year CIB @ 4% Yield To Maturity.
That's a $24 million saving in total property tax liability for Piedmonters which comes at a higher annual tax expense beginning 2023.
In the scenario described above, that higher annual tax expense would be $47.30 per $100k assessed value.