Short-term interest rates have risen sharply, but the Huntington School District still enjoyed a successful sale of $16 million in tax anticipation notes.
The low bidder for the entire issue was TD Securities. Net interest costs are set at 2.0172 percent. Jeffries LLC, 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 1.0810 percent.
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 $212,480 or $84,382 for last year’s sale of $18 million in notes according to Kathleen Acker, the district’s assistant superintendent for finance and management services.
The district budgeted $237,000 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.
Successive Huntington School Boards have pursued conservative budgeting practices, including cautious financial projections to protect residents from unexpected tax increases.
“Borrowing in the form of tax anticipation note sales remains a necessity due to the difference between the school calendar and the tax collection schedule,” 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. Because the district’s debt level continues to decline toward negligible levels and additionally because it maintains an extraordinarily high Moody’s financial rating, the net interest cost is manageable even in the face higher interest rates in general, as compared to prior years.”
Mr. Polansky said the savings generated from the TAN sale will be used to hold down next year’s tax rate.