Lodi School Board approves more defeasance measures to generate savings on debt service | Local
The Lodi School District’s defeasance measures have already saved $ 1.5 million in debt service.
On Monday, October 11, the school board voted unanimously to set the thousandth rate for its 2021-2022 debt service charge at 11.11 thousandths to further reduce the amount.
This has the additional effect of keeping the thousandth rate stable.
“One of the things we are trying to do in our district is to stabilize the thousandth rate and prevent it from bouncing up and down,” district administrator Vince Breunig said. “People are thrilled when it bounces back, but they’re not so thrilled when it bounces the next year.”
The practice of defeasance allows school districts to over-charge their debt service, with the funds generated being invested in an escrow account at Associated Bank. This money earns interest, which is used to reduce the principal and future interest on that debt issue.
“We saved quite a bit of money in a year,” said Brent Richter, district business manager. “We saved an entire year on our 20-year debt service payment. So it was very effective.
In a note to Richter’s Board of Education, it was noted that the District of Lodi had used defeasance for the past three years, setting mileage rates for the debt service levy between 11, 12 and 11.14.
Richter wrote: “Therefore, the Lodi School District 2021-2022 mile rate will be set to be slightly lower than in previous years.”
The district reduced debt service by about $ 2.5 million, which saved $ 1.5 million.
The facilities and finance committee had already approved the move. Richter proposed a motion that the board include a defeasance amount with the 2021-2022 debt service level, allowing the total thousandth rate to be set at 11.11 thousandths.
Richter predicts the measure will result in additional savings of $ 1.5 million and “theoretically” would reduce the district’s 20-year debt service payment by one year.
This is a complicated question, according to the chairman of the school board, H. Adam Steinberg. He explained that there were many variables involved and the debt service mile rate could have been 11.9 or even 11.6 depending on various factors.
One of them was the recent reassessment of the town of Lodi, which Steinberg said: “I have increased well”. He said the debt service rate in miles was expected to fall below $ 11.11 million.
Richter said the debt service rate could drop significantly, even below $ 9 million.
Through defeasance, however, the over-taxation generates funds for the escrow account, where interest accumulates on that money.
Since the measure has been approved, the community will then be asked to approve the amount of the defeasance as part of the total level at the annual meeting, scheduled for Monday, October 18.
Following this meeting, the school board will certify the 2021-2022 levy.