CARY – Cary School District 26 is reducing the debt that taxpayers have to pay off over the next seven years.
The district board unanimously approved a bond defeasance plan Dec. 18 that is expected to save the owner of a $300,000 home more than $650 in property taxes between now and 2023.
Under the plan, the district will abate a portion of its debt service extension for levy years 2017 through 2023. Money will be transferred each year from the education fund to the bond and interest fund to make partial principal payments on a series of bonds. The cash abatement peaks at $846,500 in 2018 and drops to $305,010 in 2023.
What makes it possible is the district’s establishment of an escrow account with $4 million in tax-exempt investments. Rather than select an abatement amount year by year and pull directly from cash reserves, money accrued in the escrow account will be used to pay debt service in the next seven years, thus lowering the bond and interest levy each year.
The decision will result in a
$4.2 million savings to taxpayers, board President Scott Coffey said. Because it’s irrevocable, the escrow account cannot be undone by a future board.
With bond and interest reductions, District 26 is forecasting its bond and interest levy will drop from about
$3.78 million in 2018 to $2.55 million in 2023.
“The approach our board has taken over the last four or five years is that we’ve attacked our debt service issue very aggressively,” Coffey said. “We’re doing the best we can to rapidly diminish our debt service obligations.”
In June 2016, the district had
$25.8 million in debt service obligations. It has reduced that by almost
25 percent, Coffey said.
“In the last 18 months, we’ve done several things to reduce debt service,” he said.
The district is placing $400,000 in a bond sinking fund each year until 2020, at which point it will have $1.6 million in the fund to pay off a 2011 bond with $1.6 million in principal. Cutting the payment schedule short helps the district avoid added interest under the original debt service schedule.
“Had we done nothing, we’d be on the hook for $2.1 million,” Coffey said.
The district also refinanced some bonds to save $600,000 in interest over the next seven years.