Tonawanda News — A change in state law will save the North Tonawanda School District more than $1 million next year, potentially doing away with the prospect of staff cuts, district officials said.
Assistant Superintendent Alan Getter said a large portion of a $48 million capital project completed in 2011 was financed through short-term, low-interest Bond Anticipation Notes, a financial maneuver district officials had believed would end this year because “by law you have to have to go to long-term borrowing”after a period of three to four years.
“Eventually we have to do that but right now there’s a change in law that allows us to do one more year,” Getter said.
The unplanned savings are significant at a time when cuts to state and federal funding have school districts on edge, though a portion of the $48 million capital project did receive some financial backing out of Albany. The district has also paid some of its project down over the last four years leaving it with a $35.3 million debt.
The current interest rate on the bond is currently set at 0.43 percent, with long-term serial bonds currently locked in at 3.5 percent, Getter said.
“If you multiply 3.5 percent by $35 million your interest would be $1.225 million,” Getter said. “But if you can borrow from Bond Anticipation Notes it equals to $175,000. So it’s about a million dollar difference.”
New York state law allows the use of lower bond rates for five to seven years, Getter said, with talks now circulating in the state Legislature about whether to extend the offering. But because the district began the project before the law was an enacted, there was no guarantee that the low interest bonds would be an option the district could continue beyond a few years. That changed in August when officials received word the low interest rates would be extended.
“Four or five years ago there was a rush to get projects in because they were funding them at a higher rate,” said Superintendent Greg Woytila. “Now they’re not doing that so much, allowing the lower rates. It’s a lot of money.”
The district will not see the savings until 2014, when budget talks again kick into high gear in what has become a tumultuous process of staff and program cuts. Woytila said the announcement will allow his administration and the Board of Education to breath easier, as it looks to stabilize district finances after several difficult years. Board members approved the extension of the lower interest rates Wednesday.
“It would have meant teacher cuts and we’re hoping we won’t have to cut a million in staffing to save on interest,” he said.
The district will push to keep the lower rate next year as well, though it will be a game of wait-and-see, Getter said.
“Because they are funding less projects this is a way to help,” Woytila added. “It’s good for us, it’s good for a lot of districts.”
Contact reporter Michael Regan at 693-1000, ext. 4115.