LANSING – Through June, local school districts, local governments, universities and the state have gone to the financial markets to float more than $5.25 billion in bonds, a figure well more than twice as much governing units issued in bonds in the same time in 2014.
Much of that increase is driven by local school districts who issued refunding bonds, which are being seen largely because schools issued bonds in 2005 and most have 10-year call provisions.
Plus, local governments and the state can also still take advantage of low interest rates. Some of the activity might be affected by the chance that the Federal Reserve will raise interest rates later this year, but financial experts doubted that played a major role.
However, the refunding actions would end up saving taxpayers money both because interest rates are low and because the refunding bonds would be for a shorter period of time – 20 years instead of 30, for example – which also would get lower rates because of a shorter period to pay off the bonds, said Brenda Voutyras of the Okemos office of Stiffel, Nicolaus & Company.
While dozens of school districts all across the state went to the market, most the biggest individual issues were raised by the state and the largest universities.
Chippewa Valley Schools, however, did issue two sets of refunding bonds in May that totaled more than $233 million.
In February, the Michigan Finance Authority issued $192.6 million in bonds for Detroit schools.
Still, most of the individual issues, especially from school districts, were far smaller, at a rate of less than $10 million. In June, for example, Harbor Springs Public Schools floated one of the smallest issues of the year: $1.2 million in school building bonds.
By comparison, a total of $1.83 billion in bonds had been issued by state and local agencies in June 2014. Of that, $1 billion was issued in June 2014 alone.
Of the $5.25 billion issued thus far this year, $1.42 billion was issued in March alone.
Governments have been active all year thus far (though the number of bonds issued in July so far has been far slower than the rest of 2015). A total of $955.45 million were issued in January, another $837.15 million were issued in February, $1.428 billion in March and another $813.1 million issued in April.
May was a bit of a breather for the state with just $395.86 million in bonds issued. In June, $633.5 million in bonds were issued.
That governments, especially schools, have been so active this year is no surprise, Voutyras said. Her office, which works primarily with local schools, worked on 180 issues in 2005 alone, which was also historically the biggest year for bond issues in the state.
Those bonds have 10-year call windows (when many of the bonds can be redeemed), so the bonds are being refunded and at a savings to local taxpayers, she said.
David Martel of the Michigan Association of School Business Officers said school finance officers typically look to refund when they can save as much as 2 percentage points. But with interest rates still so low, he said he has seen refunding bonds that have saved as 10 percentage points.
“It’s a no-brainer” on refunding, Martel said.
Voutyras said along with refunding, there have been some new school construction bonds issued as the state’s economy has improved and local voters have approved new bond issues.
This story was published by Gongwer News Service. To subscribe, click on www.gongwer.com
Author: Staff Writer
Source: Gongwer News Service
Date: 7/16/2015
