The North Hills School District signed an agreement last week to refinance its bond issues in a "swaption" that is expected to generate $805,245 in net profit for the district.

The board had approved the deal July 19 in a 6-3 vote.

David Hall, the district's director of fiscal management and support services, said the refinancing is possible through state legislation passed in December 2003.

"The 'swaption' allows the district to take advantage of low interest rates and refinance bond issues totaling approximately $30 million that otherwise cannot be refinanced until 10 years after initially issued," he said.

Most swaps are performed to exchange fixed-rate cash flows with variable-rate cash flows.

Many local school districts are participating in similar transactions, including Shaler Area, Hampton Township, North Allegheny and Pine-Richland. North Hills' outstanding debt includes $21.3 million on a 1998 bond issue and $9.4 million on a 2002 issue.

The money the district expects to receive in the transaction with PNC Bank will be divided into two segments -- 80 percent in escrow for debt service and 20 percent for a one-time capital improvement fund to finance construction, Hall said.

Market conditions at the time of signing dictated the precise dollar amount the district will collect.

"Now is a good time to make the transaction because short-term rates and 10-year treasury bills are at a sweet spot," Hall said.

While "sensitivity analysis projections" presented to the board July 19 indicated the district will receive a minimum of $800,000 from the transaction, it could lose as much as $890,000.

Three board members -- Vice President Arlene Bender, Jeffrey Meyer and Matt Drozd -- voted against the plan, saying it would be gambling with taxpayers' money.

Superintendent Joseph Clapper said he supported the transaction.