The school district is planning to refinance the construction bond for Riddle Brook School, saving money on lower interest rates and possibly setting a precedent for what it will eventually do with its other bonds.

The School Board will hold a hearing on the refinancing at its regular meeting on Monday, June 16, at 7 p.m., at the school district office, 103 County Road.

The original amount of the bond, issued in 1998, was $7,874,400. Ten years later, $3,949,400 remains on the principal. The district is seeking a second bond at the lower amount, which it will use to pay off what remains from the first bond, Mark Conrad, said chief executive officer for the district.

It will then pay off the second bond at a lower interest rate, saving an estimated $200,000 over 10 years, said Conrad. The district is expecting a new interest rate of 3.4 percent, compared to the old rate, which ranged between 4.65 and 5 percent.

The second bond would be for $4.1 million. It is more than the $3.9 million from the first bond because the district needs to pay a premium to the first bond holder and fees for procuring the second one. The district has to work with a financial adviser, bond attorney and underwriter to arrange the new bond. The projected savings of $200,000 takes these other costs into account, said Conrad.

He compares the process to refinancing a home mortgage, in which a homeowner gets a new mortgage at a lower interest rate and uses it to pay off his original mortgage. He said the bond refinancing will benefit taxpayers.

“That’s it in a nutshell,” he said. “It’s all about saving money through a lower interest rate.”

There is an objective measure of whether the refinancing is worth it, Conrad said. If the process produces savings equal to 3 percent or more of the remaining principal, the financial advisor recommends the district follow through with it.

The Riddle Brook bond is the oldest one the district holds. Most are under 10 years old and, normally, it is not until they reach the decade mark that they can be refinanced, said Conrad.

The district will be evaluating the possibility of refinancing its other four bonds, most of which are recent and related to the middle-high school project.

They include the following: $3.2 million for additions to Riddle Brook and the school district office, as well as a water line extension, $49.7 million for the middle-high school, $800,000 for the Manchester Water Works line extension, and $2.7 million for startup costs for the middle and high schools.