The Sioux Falls School District just completed a successful bond tender process that will reduce the district's debt from the 2018 bond election by about $2.3 million, district business manager Cameron Kerkhove announced during a school board meeting Monday, Aug. 24.

Bonds are sold to investors so the district can have enough funds to pay for school construction and capital improvement projects. Then, the district repays that amount with interest over the years using property tax revenue in a process approved by voters.

"We wanted to look for any efficiencies and any savings that we can come up with to be fiscally responsible before this next bond vote," Kerkhove said, pointing to $183 million worth of capital improvement projects the district has identified for a potential April 2027 bond election.

More: SFSD eyes $183M worth of projects that could make it into April 2027 bond vote

Kerkhove was sworn in as business manager in the July 13 school board meeting after former business manager Todd Vik retired on June 30. Kerkhove explained that normally, districts refinance bonds down to lower interest rates, but interest rates aren't low in the current market, so that wasn't an option, he said.

Instead, D.A. Davidson, an investment firm that oversees the district's bonds, offered an option that they've used in other states to save money: bond tendering.

The district traded $48,590,000 in old bonds from the 2018 election for $39,695,000 in bonds -- a difference of almost $9 million -- decreasing the district's current debt, but putting a higher interest rate on the new $39 million compared to the old $48 million.

"Maybe you would say the bad news is that $39 million now has a higher interest rate than the old $48 million, but in the long run, we're still saving money," Kerkhove said.

Kerkhove said this move will result in a total net savings of $2,363,879.55 over the life of the bond payments, the last of which will be in fiscal year 2040.

While the bond amount decreased by about $9 million, the savings will be only more than $2.3 million because of the high interest rate, or about $200,000 per year in bond payments, Kerkhove said.

"We'll have a lower bond levy, a cheaper bond payment, which is a win for everyone," Kerkhove said. "So, that was a successful process. It is done and completed, and that was just a big win that we had recently that we're proud of and wanted to get out into the public."

When the district's bond council put the bonds up for tendering, about 40% of the bond holders wanted to tender their bonds, Kerkhove said. It was the first bond tender process that D.A. Davidson did successfully in South Dakota, and the second-highest rate the firm has ever had, he said.

"They're very happy with how it turned out," Kerkhove said.

Superintendent Jamie Nold called the bond tender process a "very good news report" as the district continues to look for efficiencies.

School board president Nan Kelly said that after two years where the board cut the district budget by a combined $5 million, savings like these are a "great way" to raise teacher pay and keep salaries competitive.

Board vice president Gail Swenson said that between the bond tender, previous budget cuts and reduced opt-out, the district has saved several million dollars with "innovative moves like this."

"Thank you for coming on new, and finding some more ways for us to save money for the taxpayers," Swenson said to Kerkhove, who was the business manager for the Tri-Valley School District from July 2022 to June 2026, according to his LinkedIn page.

Board member Dawn Marie Johnson said that even though the board was in a "cut mode" for previous budget cycles, "we didn't lose the integrity and quality of our education."

This article originally appeared on Sioux Falls Argus Leader: Financial maneuver will save Sioux Falls schools $2.3M from 2018 bonds