Lehighton Area School District is moving forward with a bond restructuring that supporters hope will help build up a fund balance and lead to a bond rating increase down the road.

According to officials from the Public Financial Management firm, the restructuring of 2014 and 2015A bond notes should allow the district to bank savings of $1.88 million in the 2021-22 fiscal year and $1.24 million in the 2022-23 fiscal year. To get the short-term savings, however, the move will cost an estimated $2.69 million over the life of the bonds, which are set to fall off after 2044.

Lehighton’s board voted 5-4 on May 24 to approve the restructuring and put the savings over the short term in a restricted fund balance.

“It’s important to me that the savings be set aside so it can’t be consumed as part of our budget,” Director Nathan Foeller said before his vote in favor of the restructuring.

Joining Foeller in support were Wayne Wentz, Larry Stern, Stephen Holland and Rita Spinelli.

David Bradley, Joy Beers, Richard Beltz and Gail Maholick combined for the dissenting votes.

In recent months, Bradley repeatedly spoke out against the move, saying he couldn’t justify the long-term cost for short-term savings.

“Most people, when you restructure debt, are reducing the amount of interest they are paying and are lowering their debt,” Bradley said. “Here, we are adding to the encumbrance. You’re adding a buffer by the moving minimum payments to the end of these loans, costing you upwards of $2 million. This savings could be accomplished by standard fiscal management.”

In discussing the item at May’s finance committee meeting, Business Administrator Edward Rarick said PFM estimated that if the district restructures the 2014 and 2015 A notes now, it could do better when looking to refinance its 2015 bond when it becomes callable in November 2022 and its 2015 A bond when it becomes callable in November 2023.

Using today’s interest rates, PFM projects those refinancings in 2022 and 2023 could produce a combined net savings of over $4 million.

“So when you factor in the $2.6 million initial cost of restructuring our debt this year, we could see a net savings of $1.667 million if the future refinancing plays out the way PFM thinks it could,” Rarick said at the finance meeting.

Moody’s Investors Service downgraded Lehighton in August 2020 from A3 to a Baa1 rating. At the time, Moody’s said the downgrade reflected “the district’s ongoing inability to achieve structural balance, as well as its modestly sized taxable base and elevated debt burden.”

Zach Williard, of PFM, said the short-term savings, should the district hang on to it, could lead to an upgraded rating in several years.

“To me,” Foeller said, “this restructuring is an important part of getting our finances back on track and opening the door to getting our other bonds refinanced in the future. It’s important that this be done wisely so we can get out of the situation we are in.”