By JIM HARDIN
CNHI
ROCKWALL — By Jim Hardin
Herald-Banner Staff
The Rockwall Independent School District entered into a financial agreement in 2006 that has turned into a million-dollar benefit.
“I will tell you, this thing is working exactly as it was planned back four years ago and has done well,” Mike Singleton, the school district’s chief financial officer, told school board members Monday night.
“This is really good news,” he added. “We can cash in a million dollars and bring it in for our debt service fund and use that to keep our tax rates down and use for our finances.”
For the last several months, Singleton said, school officials have been evaluating tax rates on bonded debt and ways to handle financing for $65.7 million remaining from the 2006-2007 bond authorizations. He said officials looked at how the financing could affect the tax rate, noting that the school district’s property value had not increased as quickly as originally projected.
“So, we’ve been looking at all sorts of ways to proceed forward to do this financing and to do it with minimal amount of grief on our tax rates,” Singleton said. “So, one of the options we had resulted from something we put into place in 2006.”
The 2006 action was a “swap agreement.”
“That’s exactly what it’s called, where we swap an agreement with the bank in the way we calculated interest on that,” Singleton said.
“Initially,” he said later, “we had some negative aspects of that, but as the yield curve went up on interest rates, that turned out to our advantage.”
According to information provided to school board members, Rockwall ISD entered into a swap agreement on June 6, 2006, to reduce bond interests costs and take advantage of a potentially “steepening” yield curve. The school district exchanged monthly cash-flows with a bank, paying a fixed rate of 3.853 percent instead of the then-comperable fixed rate of 4.83 percent.
The resulting savings to RISD taxpayers — $5,585,000.
The swap was amended on July 1, 2006, to increase the advantage of a potentially “steepening” yield curve. This swap resulted in an additional interest cost savings of $222,000.
The school board also approved Teacher Retirement System of Texas TRS-ActiveCare as Rockwall ISD’s medical plan provider. This state health plan ensures about 92 percent of Texas’ school district, according to information provided at the meeting.
The school district’s cost will be lower, but the exact cost will not be known until later this year.
“I think this is kind of a paraphrase of what I understand after the discussions we’ve had,” said board member Chris Cuny.
“There’s always going to be confusion when you change a plan, the uncertainty. But my understanding is that we’re essentially providing the same health care benefits that we currently have. It’s going to be a lower cost, not only to the district, but hopefully to the employees who choose to cover their family.”
