Simplified: The Sioux Falls School District is the first in the state to use a "bond tender" process as a way to save $2.36 million over the next decade. Here's what you need to know.

Why it matters

  • The district has been in a season of belt-tightening as state funding in recent years fell short of what's promised under state law. Over the last two years, the district has cut $5 million in ongoing expenses from its budget.
  • The bond tender is a way for the district to save money on its current debt – about $120 million, much of which supported building Jefferson High School, Ben Reifel Middle School and Marcella LeBeau Elementary school.
  • The district essentially sold off a portion of that debt and then re-purchased a smaller amount of debt at a higher interest rate. Despite the interest rate increase, the district is still expected to save $2.36 million over the life of the bond – about 13 years, according to Business Manager Cameron Kerkhove.
"I think this emphasizes the fact that we don't just talk about being fiscally responsible, we are always looking for those opportunities to make our dollars go as far as they possibly can," District spokeswoman DeeAnn Konrad said.

How does a bond tender work?

Functionally, it's similar to refinancing debt – like, for example, if you refinanced your mortgage loan and ultimately paid less money for your house because you saved on interest.

  • Except, for the district, they're not saving money on interest, they're paying less principal on the loan.
"We took $48.5 million of debt that we have, and we bought it back for only $39.6 million," Kerkhove said.

Not all of those savings are directly realized. When you account for the fees to pull off a bond tender, the savings are closer to $5.7 million. And then when you account for a higher interest rate to pay back the smaller amount of debt, the total realized savings is estimated at $2.36 million.

However, the district could refinance that debt again in the future and save even more money with a lower interest rate, if rates go below what it's currently paying at 3.94%.

What happens next?

The school board already approved the district to look into the bond tender back in May, and the specifics were shared with board members during their retreat on Monday afternoon.