Brian Williams, Times of Northwest Indiana
HEBRON | They didn't turn out to be interest-free as originally advertised, but loans for school modernization projects made available under the federal stimulus plan are saving area school districts sizeable amounts of money.
The loans also are giving life to some projects otherwise unaffordable at the moment and spurring energy cost savings as schools become more energy efficient.
Financed with Qualified School Construction Bonds, an element of the American Recovery and Reinvestment Act of 2009, the loans are designed to stimulate school modernizaton and construction projects.
The Indiana Department of Education distributed awards totaling $178 million from $442 million in requests in 2009. The maximum award was $10 million per project.
Another round of school bonds will be available this year, but Indiana has not yet been informed of its allocation, DOE spokesperson Lauren Auld said.
For Hebron schools, the program will save the district more than $700,000 over the 14-year life of the bonds for a $3.9 million renovation project necessitated by damage from frozen water pipes in December 2008.
The savings come from an interest rate on the bonds less than half of that of a traditional tax-exempt bond, Superintendent George Letz said. The savings are a lifeline at a time of sharp state cuts to public education funding and a welcome break for taxpayers, Letz said.
Rather than paying bondholders interest, the school bonds provide federal tax credits to the investors and are designed to reduce the cost of borrowing for public school construction projects.
Lisa Rosinko, business director for East Porter County School Corp., said its $1.56 million school bond to upgrade energy efficiency at Washington Township Elementary School was a more cost-effective way for the district to go for a renovation project that had to be done.
Otherwise, the district would have had to borrow at market rates or use the capital projects fund, requiring a levy, Rosinko said.
With the federal loan, East Porter will save almost $340,000 in interest costs, Rosinko said.
In addition to reduced interest costs, districts stand to realize energy cost savings from many of the projects. Union Township School Corp. was guaranteed $3.3 million in savings by its contractor for a new ventilation system at John Simatovich Elementary School.
Before the stimulus money, Duneland School Corp. had an existing plan to upgrade energy efficiency at six schools, to be financed through the district's capital projects fund.
But the availability of school bonds allowed the district to start sooner and thus realize savings more quickly, said David Pruis, Duneland's assistant superintendent for finance.
According to Duneland financial consultant Curt Pletcher, the district will save about $1.3 million in interest costs on the $9.6 million project, compared to traditional bond financing.