The Huntington UFSD recently sold $16 million in tax anticipation notes.

Huntington Saves on Tax Anticipation Note Sale

The Huntington UFSD recently sold $16 million in tax anticipation notes.

October 15, 2020

Low short term interest rates helped Huntington UFSD realize substantial savings on the sale of $16 million in tax anticipation notes. The United States Federal Reserve has pursued policies that have effectively driven down rates to address economic difficulties created by the COVID-19 pandemic.

The district is currently in a strong financial position with extremely low debt and a high rating by credit agencies.

The low bidder for the entire issue was TD Securities. Net interest costs are set at 0.30005 percent. BNY Mellon Capital Markets LLP, JP Morgan Securities LLC and Oppenheimer & Co. also submitted bids for the issue. The district retained Hawkins, Delafield & Wood as its bond counsel. Last year’s interest rate was 1.2533 percent on an $18 million sale and two years ago the rate was 2.0172 on an $18 million sale.

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 $33,387 according to Kathleen Acker, the district’s assistant superintendent for finance and management services.

“The outcome of this sale is extremely beneficial to the district,” Dr. Acker said. “The decrease in the interest rate was due to the Federal Reserve presumably not raising rates until 2023. When speaking with our financial advisor, he shared that the district received one of the best rates on a TANs sale that he has seen since the beginning of summer 2020.”

The district budgeted $260,000 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 significant fiscal consequences if sufficient funds weren’t allotted. Savings generated from the TAN sale will be used to hold down next year’s tax rate.

“The sale of tax anticipation notes remains a necessity due to school calendar and tax collection schedule incongruence,” Huntington Superintendent James W. Polansky said. “Revenue from the sale ensures that the district can cover its costs during the months before school taxes are collected. This year, the district will save considerably on its borrowing costs due to very low interest rates and the district’s favorable financial rating. During a fiscally challenging time, these savings are even more critical.”

Successive Huntington School Boards have pursued conservative budgeting practices, including cautious financial projections to protect residents from unexpected tax increases.