Depending on the financial market, the Jackson County School System could save millions on refinancing a $70 million bond package — the largest such issuance by the district.
And if the Jackson County Board of Education decides to move forward, two investment firms say they are ready to handle the deal.
Representatives from Citigroup and Merchant Capital pitched not only the benefits of refinancing the district’s $70 million bond package that was issued in 2005, but also selecting their company for the financial transaction.
Both companies told board members that interest rates are at the lowest levels in more than 40 years.
“It’s an opportune time to be looking at this and it’s going to be the board’s call on whether or not they want to move ahead now,” said Bryce Holcomb, director of Citi’s office in Atlanta.
In 2005, Jackson County voters approved a $70 million bond referendum that included funds to build East Jackson Comprehensive High School, Gum Springs Elementary School and Kings Bridge Middle School, along with additional construction projects at existing schools.
Last year, voters renewed the education local option sales tax (ELOST) — which is expected to generate up to $30 million to pay off the 2005 general obligation bonds.
That bond package was financed at 4.99 percent and matures in 2025. The BOE may potentially refinance $63.9 million to $66.5 million in bonds.
With interest rates dropping dramatically since December, both companies told the BOE that now is the time to consider refinancing the bonds.
Merchant Capital based its proposal on the market as of Wednesday, Feb. 8 — when the interest rate was 2.24 percent. Citi based its estimates on the market on Monday, Feb. 13 — for an interest rate of 2.19 percent.
But, their potential savings to the school system over the life of the bonds varied greatly, according to the presentations.
Merchant Capital said it could save the district an estimated $4 million, while Citi said it could save the school system an estimated $7.1 million. Those figures account for the school system’s costs to refinance the bonds.
Both companies said the Jackson County School System should refinance its 2005 series bonds because the potential cost-savings exceeds the industry standard savings of three percent.
Andrew Tritt of Merchant Capital said the district’s savings would be 5.79 percent — a figure not only above industry standards when considering a refinance, but also above the conservative standard of five percent.
Holcomb said Citi could help the school system save 9.77 percent of its present value savings with a refinancing of its bonds.
Merchant Capital has closed more than $200 million in bond transactions in Jackson County since 2000. Its most recent pending or completed transactions include those for Jackson County government, the Jackson County Water and Sewerage Authority, the Jefferson Public Building Authority and the Town of Braselton. It also sold the bonds for the construction of the Bear Creek Reservoir and its water treatment plant.
Citi is ranked the number one of underwriter policies for municipal debt and has handled the most refinancing transactions in Georgia that totaled more than $50 million.
Citi has worked with the Jackson County School System since 1998, when it refinanced a 1994 bond package for $12.3 million. It also refinanced a 1993 bond package in 2003 for $2.8 million and refinanced the 1998 bonds in 2008 for $9.8 million. The company says that it has saved the district a total of $894,000 in debt service through the three refinancing deals.
Once the board of education decides if it wants to refinance the bonds, both companies said they will need 40-50 days to prepare the required documents. The Jackson County Board of Education took no action on the proposals during its voting session on Monday.
