North Allegheny refinances bonds

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North Allegheny school directors have voted unanimously to refinance $17.3 million in bonds to take advantage of lower interest rates. The interest rates will change from 3.69 percent to 1.05 percent, which will save the district approximately $680,000.

The vote came during the board's  March 19 meeting, when school directors also voted to refund another series of bonds that were in an interest rate swap, transferring that money to variable rate bonds with the Butler County General Authority.

Board members Tara Fisher and Scott Russell voted against entering into another swap. Mrs. Fisher, a certified public accountant, said the move put too much of the district’s debt — 62 percent — into variable rate bonds.

“I personally am not comfortable putting the district in that position. I feel that is too big of a percentage,” she said. And, because the new bonds have a longer maturity date, “I don’t see if as an even swap of swaps,” she added.

Jay Wenger, managing director of Susquehanna Group Advisors Inc., told board members that the deal is a “conservatively structured swap designed not to put the district at risk.”

Jason DeMartini of PNC Bank noted there were only three months in the last six years where North Allegheny had a negative cash flow.

“The way these things are structured, the district prospered during the economic calamity,” he said.

North Allegheny had entered into the “swaption,” a complex financial maneuver,  in 2004, when many school districts across Pennsylvania saw interest rate swaps as a way to make quick profits. But the deals rarely worked as anticipated, and some districts are paying large termination fees to get out of the swaptions.

Mrs. Fisher said she would prefer to pay the $2.5 million termination fee rather than enter into another variable rate scenario, and also suggested “unwinding” three other swaptions with 2008 and 2011 bond issues.

But board member Joseph Greenberg said digging into the district’s savings to pay the fee would affect its credit rating.

If they didn’t act March 19, Mr. Wenger said, the district would be on the hook for $4,500 a day in additional interest if the swap was exercised and interest rates rose. “We would prefer to resolve the problem.”

Mr. Greenberg, Libby Blackburn, Maureen Grosheider, Kevin Mahler, Thomas Schwartzmier and President Chris Jacobs voted for the resolution. Ralph Pagone was absent.

Mr. Mahler and Mr. Jacobs both said they didn’t like the deal, but thought it was in the best interest of the district to move forward.

“That termination is just too expensive,” Mr. Mahler said. “I’m not voting for this because I think it’s a great idea. I'm voting for this because I feel it is a corner we are backed into.”

In other business, board members discussed the annual diversity report, which cited 18 reportable incidents — including sexual harassment and bullying associated with a student’s race, gender or disability — in the 2012-13 school year.

Mrs. Grosheider pointed out there had been more than 20 incidents in each of the preceding two years, many of them in the middle schools.

James Bradley, supervisor of elementary education, said the number of incidents over the past seven years has fluctuated between 15 and 27, with an average of 21.

“The principals haven’t been seeing the occurrences,” he said. “We are really seeing the impact of that education with kids not acting that way and, if you do, there are consequences.”

Also, resident Tim Appleton asked the board why the district is no longer investigating an International Baccalaureate Program, which was one of Superintendent Raymond Gualtieri’s goals. Mr. Jacobs  announced the change in thinking in January, citing the expense of developing an IB program.

An IB program is something that separates the top schools from others, Mr. Appleton said.

“I know there are financial considerations. I would like to have some explanation as to why the IB program was just peremptorily dropped,” he said.

Mr. Appleton added that the district has taken a few steps in recent years that concern him, such as adding participation fees for sports and marching band.

The fees “started to separate people in the community who could afford certain activities and people who may not be able to afford them,” he said. “I am a firm believer that, as a public school, to the best of our ability …the wealthiest person in the community and the poorest person in the community should have the same opportunities.”


Sandy Trozzo, freelance writer: suburbanliving@post-gazette.com.

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