TAN Sale Produces Interest Savings
The lowest interest rates in generations have allowed the Huntington School District to realize large savings in the sale of $27 million in tax anticipation notes. The sale will close this week.
The low bidder for the entire issue was Morgan Stanley. Net interest costs are set at .224630. Jefferies & Company, JP Morgan Chase Securities, Inc., JP Morgan Chase Bank, N.A., TD Securities (USA) LLC and Jannney Montgomery Scott LLC also submitted bids for all or part of the issue. The district retained New York Municipal Advisors Corp. as its fiscal advisor to oversee the process.
The district annually issues so-called TANs to fund operations while it waits to receive property tax revenues from the town. This year's TAN sale will result in net interest expenses of $43,297.50, according to Sam Gergis, the district's assistant superintendent for business.
"The structure of the tax collection schedule forces the district to sell the tax anticipation notes annually," Superintendent James W. Polansky said. "There have been some statewide lobbying efforts to realign the schedule with the timing of district expenditures so that the notes would not be necessary. In the meantime, it is comforting to know that the net interest charge on these notes is generally as low as it has ever been, contributing to significant district savings."
The district had budgeted $600,000 for TAN interest costs. The higher figure was used during the budget development process last spring because district officials were concerned that a rise in inflation and interest rates could lead to serious fiscal consequences if sufficient funds weren't allotted.
Mr. Gergis said the district's "good credit standing" and a "favorable" bond market were the keys to Huntington's low interest rate. Successive Huntington School Boards have pursued conservative budgeting practices, including cautious financial projections to protect residents from unexpected tax increases.
Superintendent James W. Polansky said the savings generated from the TAN sale will be used to hold down next year's tax rate.