Polk County Public Schools is poised to save more than $1 million after refinancing its debt service to a lower interest rate.
“This is very good news for the school district,” said Chief Financial Officer Michael Perrone.
“We’re reducing our debt service payments, resulting in $1.2 million in savings, and it strengthens our standing with rating agencies, which means we’ll get better interest rates when borrowing money in the future.”
School Board Chair Lori Cunningham congratulated Perrone on the move during last week’s work session.
“I want to publicly thank Mr. Perrone,” she said. “I want to publicly thank you for your time, effort and diligence to eliminate that financial situation with the district and be able to over time save us that kind of money.”
COP stands for certificate of participation. “It’s another word for debt, or for the layman, a mortgage,” Perrone said.
Perrone said that several years ago, PCPS took on debt for capital improvements. At the time, the school district agreed to an adjustable interest rate, also known as a SWAP.
“In the early 2000s, we entered into a variable interest rate vehicle, where the interest rate can go up or down. It’s riskier,” Perrone said.
In assessing the school district’s debt, Perrone and a team of financial advisors saw an opportunity to refinance debt at a low interest rate.
“We got a good rate, and we will finish the debt at that rate,” Perrone said. “It’s saving money, and it’s a safer investment.”
With this most recent refinancing, Perrone has achieved a significant goal for the district: None of its debt will be financed at a variable interest rate.
“We are totally done with variable interest rates,” he said.
Superintendent Jacqueline Byrd and Cunningham will sign closing documents securing the new lower, fixed interest rate later this month. Perrone said the $1.2 million savings will free up funds that can be used for other capital needs in the future.
“The funding source is the local capital improvement millage, or property taxes. What happens is that every year, we take from that funding source the money we need to pay debt service,” Perrone said.
“We will now be taking less money from that funding source. The money must still be used on capital, but now we’ll have money to spend on building, renovating and improving our facilities.”