Montgomery refinances bonds

Savings of $260,000 seen in new budget

By: Greg Forester
   MONTGOMERY — The Montgomery Board of Education was able to reduce the tax increase on an average home by around $35 thanks to creative bond refinancing.
   The immediate savings of $260,000 was realized in the 2007-2008 proposed budget by refinancing the school district’s bond structure, which translated in a tax impact reduced from around $270 to $235 on the average home.
   The refinancing will bring a total of $3.5 million in savings over the life of the bonds, according to Board of Education Secretary Timothy Stys.
   "This is a done deal, and the school district can use these savings this year," said Mr. Stys at a recent budget meeting.
   The type of reduction that Montgomery undertook some months ago to create these savings was recently made into law.
   The legislation, known as A-5, requires school districts with bonds that could be refinanced to yield a savings to do so.
   "The board was really ahead of the curve on this one," said Mr. Stys, at Tuesday’s final public hearing for the proposed 2007-2008 budget.
   The considerable savings were in part due to the recent drops in the stock market, which lowered the interest rate on municipal bonds as demand increased, according to board officials.
   When the stock market dropped, it allowed the school district to refinance and save a significant amount of money.
   The extra funding comes at a crucial time when school boards across New Jersey are looking for other methods of generating funding than the recently capped property tax levy.
   New Jersey school districts depend heavily on property taxes for funding, with nearly 87 percent of Montgomery’s school funding coming from property taxes.
   While imposing property tax caps on the state’s school districts, New Jersey continues to rely on a formula for state education aid that Montgomery Board of Education members call "outdated."
   "Its not right that there’s no formula for state aid," said Mr. Stys.
   Although Montgomery received $880.23 in state aid per pupil in 2001-2002, the district will receive $784.29 in state aid per pupil in 2007-2008.
   Both the Board of Education and the Township Committee have discussed appealing to Trenton for a re-examination of the state aid formula for districts like Montgomery.