Cary Grade School Board Saves by Refinancing High Interest Bonds

A press release from the Cary Elementary District 26 School Board:


CARY, IL – The Board of Education of Cary School District 26 took steps this last month to reduce property taxes for its residents through a combination of refunding and fund balance contributions.

The Cary School District's Administrative Office.

The Cary Grade School District’s Administrative Office.

The District recently refunded a portion of its Series 2011 Bonds to generate over $620,000 of expense savings by taking advantage of lower interest rates since the bonds were first issued.

Additionally, the Board of Education has dedicated some of its current fund balance to further reduce debt by contributing an additional $250,000 towards principal, and has agreed to set aside $1,600,000 to retire another bond in 2020.

The effect of these actions will result in taxpayer savings of at least $3 million over the life of the existing bonds.

The District engaged the refunding as part of a two-step process and expects further savings to be realized after the next refunding bond sale, scheduled for early November.

Combined with prior refundings undertaken in 2013 and 2014, along with cash contributions from its fund balances, the District expects to deliver a reduction to future property taxes of over $4.7 million once the refunding programs and further abatements are accomplished.

“The refunding of these bonds will result in significant savings for taxpayers of Cary,” said Director of Finance and Operations Jeffrey Schubert.

“It has been the goal of the Board of Education to look for ways to generate taxpayer savings without
impacting our classrooms, instructional programs and services to families.”


Cary Grade School Board Saves by Refinancing High Interest Bonds — 6 Comments

  1. it would be nice if they didn’t add any new stuff till the debt is paid off.

    Gov agencies shouldn’t have constant debt, interest eats up funding that should be used to run the district.

  2. Thanks for taking advantage of the current interest rate market opportunities to reduce our long-term debt obligations.

  3. When my kids were in school I remember going to D-47 board meetings.

    There were no bonds, but rather a portfolio of CD’s.


    This is the same GENERALIZED PR misdirection which mollifies citizens who are in the mood to NOT want to look further, or look at the true himan cost of funding the fuzzy-good-feel of schools’ no-questions-asked budgets.

    This re-fi is misdirection unless current spending is pledged to NOT include this “savings”

    (It isn’t “savings”, it is extrusion of years of paying interest and maintaining debt; and re-fi costs 2% of debt paid to attorneys and bond underwriters).

  5. Scott Coffey, who is on the Cary District 26 school board, has made a few comments regarding school district finances on the blog.

    He has basically pointed out that other school boards don’t dig into the issues further.

    Note in the press release it seems the school district is paying an additional amount towards principal to retire bond debt, over and above the debt service schedule.

    That’s rarely done in Illinois school districts.

    And the school district has agreed to set aside an additional amount to retire a bond in 2020 (instead of refinancing in 2020).

    Again, that’s rarely done in Illinois school districts.

    Cary District 26 is one of the few school boards that digs into bonds instead of just taking the school district financial advisor’s Powerpoint at face value.


    A HUGE problem with Illinois bond referendums, and advisory bond referendums, is property taxpayers are not given adequate disclosure upfront as to the the complete estimated costs.

    This is evident in the Crystal Lake library advisory bond referendum on the November 8, 2016 ballot.

    Taxpayers should be provided, and are not being provided, the following for the Crystal Lake library advisory bond referendum:

    1. Current annual debt service schedule (principal, interest, total) for existing bonds.

    That would be the annual debt service schedule until all bonds are retired.

    2. Estimated annual debt service schedule (principal, interest, total) for proposed bonds.

    3. Estimated interest rate and all estimated costs for issuing the bonds.

    All of that should be placed in one easy to local section on a website, along with all information presented to the administration and / or the board.

    That would include Powerpoint presentations, spreadsheets, reports, and other documents.


    An estimated annual debt service schedule would look something like this:

    Year 1 – Principal – Interest – Total

    Year 2 – Principal – Interest – Total

    Year 3 – Principal – Interest – Total


    Grand Total – Principal – Interest – Total

  6. Mark, you have it right.

    The District is utilizing 3 techniques simultaneously that results in the direct reduction of the debt service tax levy.

    First, the District is refunding existing bonds that carry higher interest rates with new debt at a lower rates, which results in the interest expense reduction noted above.

    Note, that the interest savings component at $620K only comprises a fraction of the total $3.0 million in savings.

    Second, the District coined the term “Refund for Less” several years ago whereby it contributes equity at closing to pay down the amount of principal required to be refinanced.

    In this case, it was $250K.

    Third, we established a Bond Sinking Fund that will total $1.6 million that will be used to retire our 2011-C series bonds when they become callable on 2/1/20.

    The District will contribute $400K in each of the next 4 years out of existing fund balance to provide the funds necessary for the early cash redemption in 2020, thus saving the taxpayers an additional $2.050 million on the debt service tax levy.

    The District has used these strategies, along with the direct abatement of the Debt service levy, in each of the last 4 years now, resulting in roughly $4.7 million in taxpayer savings.

    I can understand Susan’s incredulity at the press release, but we have been doing this for years.

    And, from what I understand, no other districts are doing anything like this.

    Apparently, the main reason is that the concept never gets past a district’s CFO to make it in front of a Board. District Administrators have been trained to never concede any fund balance back to the taxpayers, whether its in the form of a Bond Sinking Fund, Refund for Less, abatement or flat levy, etc.

    It just never made any sense to me in having a governmental body sitting on millions of dollars in fund balance, earning 0.2%, while having outstanding debt costing the taxpayers 4% to 6%.

    This is the very definition of “Negative Arbitrage”, where your cost of capital exceeds your return on capital by 500 basis points.

    If any other governmental board members in the area wish to get any more information on what we’re doing, I’d be happy to help.

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