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School District Taxpayers Expected to Save Nearly $8 Million a Year with Anticipated Bond Sales

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By Jorge Casuso

Editor's note: A previous version of this article stated that the School District saved taxpayers a total of $26.8 million in interest costs by refinancing its loan last year. The District saved taxpayers $6 million.

April 23, 2021 -- An expanding tax base, low interest rates and a high credit score could save taxpayers nearly $8 million a year when the School District refinances its bonds "in the coming months," District officials said Friday.

The District is expected to sell its second series of bonds for both Measure M (for Malibu Schools) and Measure SMS (for Santa Monica Schools), passing on a total savings to taxpayers of more than $250 million, officials said.

Approved by voters in 2018, Measure SMS -- which will help upgrade and replace outdated facilities -- was the largest School District bond measure in Santa Monica history. Malibu voters approved a record $195 million bond in their city the same year.

“Since 2018 when the bond program was set up, our tax base has grown in both communities and is ahead of projections," said Melody Canady, assistant superintendent of business and fiscal services.

That, combined with the lower interest rates and high credit rating "is going to result in some major taxpayer saving,” Canady said.

The second round of sales come four months after the District refinanced a portion of the record-setting bonds last year ("Santa Monica Property Owners to See Lower Tax Bills," August 6, 2020).

The lower rates are expected to save the District $6 million in interest costs that will be passed on to property owners in Santa Monica and Malibu through lower tax bills, officials said.

The new bond sales are expected to dwarf last year's refinancing, with officials calling it "a grand slam" compared to "a home run."

Based on the latest calculations and projections, the District expects to sell approximately $200 million in Measure SMS bonds and $80 million in Measure M bonds over the life of the programs, which expire in the 2053-54 fiscal year.

District officials are also awaiting the fate of Federal legislation governing municipal bonds that could save an additional $10 million.

The new bond funds are expected to pay for, among other things, "health, safety, and security improvements" and the Samohi Exploration and Gold Gym project.

The funds also would pay for multiple improvement projects at Santa Monica elementary and middle schools and the new administration / library / classroom building at Malibu High School.

The anticipated bond sales comes as the District saw its credit rating drop from Aaa to Aa1 after Moody’s overhauled its rating methodology and framework for public school districts.

“It’s frustrating to have our credit score change due to a unilateral adjustment in ratings methodology when all of our other metrics have improved since our last rating and will continue to improve,” School Board President Jon Kean stated.

“It seems like wealthier communities with significant and vital facility improvement programs took the biggest hit from this new framework.”

Moody's found the District's "debt, pension and OPEB liabilities are high, and its fixed cost ratio is elevated."

OPEB, or Other post-employment benefits, can include life insurance, health insurance and deferred compensation.

Canady noted that Standard & Poor's, the other major credit rating agency, rated the District rated AA+.

“We are still a phenomenally-rated district,” she said.

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