A resolution authorizing the sale of more than $13.8 million in bonds to fund Proposition R 2008 building projects was approved last week by the Lindbergh Board of Education.
Board members voted 6-0 to approve the resolution authorizing the sale of a total of $13,834,365.80 in tax-exempt general obligation capital appreciation bonds and taxable general obligation Build America bonds. Board member Kathy Kienstra was absent from the Feb. 9 meeting.
The bonds are scheduled to be sold March 9. This will be the third and final sale of bonds for Proposition R 2008, a $31 million bond issue approved by district voters in November 2008.
Prop R 2008 did not increase Lindbergh’s debt-service tax rate, but extended the existing rate of 38 cents per $100 of assessed valuation an additional five years.
The Board of Education placed Prop R 2008 on the ballot with the goal of providing a long-term solution to space concerns at Sperreng Middle School.
More than 1,300 sixth-, seventh- and eighth-graders are jammed into the middle school that was designed to accommodate 800 pupils when it opened in 1970.
While Sperreng will remain a sixth- through eighth-grade middle school, funds from Prop R 2008 will be used to convert Truman Elementary School to a sixth- through eighth-grade middle school, add onto Crestwood and Long elementary schools, convert Concord School to an elementary school and construct a new Early Childhood Education building next to the Administration Building at 4900 S. Lindbergh Blvd.
District officials and pupils in December participated in groundbreaking ceremonies for the new Concord Elementary School and Early Childhood Education Building.
In March 2009, the Board of Education approved the sale of the first $10 million installment of Prop R 2008 bonds that carried an interest rate of 4.557 percent.
Nine bids were submitted to purchase the first installment of Proposition R 2008 bonds, which were sold to Robert W. Baird & Co. Inc. of Red Bank, N.J.
By seeking bids for the sale of those bonds, Lindbergh officials saved district taxpayers nearly $677,000.
In June, board members voted to apply for $11.7 million in Qualified School Construction Bonds offered through the federal stimulus package.
State officials announced in July Lindbergh would receive $7,165,910 in the federal bonds, which will carry an interest rate of 1 percent.
The federal bonds could save district taxpayers as much as $2 million dollars, according to district officials.
Chief Financial Officer Pat Lanane told board members last week that two types of bonds will be sold for the final installment of the Prop R 2008 bonds — capital appreciation bonds, or CABs, and Build America bonds, or BABs.
While that’s “a little bit unusual,” he said, “… It’s necessary that we fit the pieces of the maturity schedule together at the end in order to also match our assessed value growth for those years, 20 years out or so. So we really need to have two particular instruments …
“Basically, the CABs are used because we’re able to fit the entire amount in one year. They come due, large amounts in one year, interest and principal. We pay no interest at all ’til that year, and so it’s accrued interest up to that time. And again, that helps us with figuring in our maturity schedule for our no tax-levy-increase bond issue,” Lanane said.
“The other piece is one that is offered through the federal government, Build America bonds. And the tremendous advantage of that is there’s a subsidy paid by the federal government and the subsidy will save taxpayers right at $400,000 over conventional bonds. So it’s a great deal and it’s like the Qualified School Construction Bonds that we did last time. These are one-time-only deals that are out there and I’m just so thrilled that we were in the market at the time to be able to take advantage of these,” the chief financial officer said.
“It’s a true advantage to our taxpayers. It doesn’t provide one penny more for the district to spend on the same projects. We think we’re fine. The amount that we asked for is going to be the amount that we need to do the projects, but it does lower the interest payments for our citizens.
“So that’s just a great deal for the public and I’m very happy we could take advantage of that …,” Lanane said.
The bonds will be sold in an open, competitive sale March 9, he said, adding, “This is not a negotiated sale.”
The district retained its Aa2 bond rating from Moody’s Investors Service, Lanane told the board, noting that when he spoke to a Moody’s bond analyst he was told less than 100 school districts in the United States carry that bond rating.
“… Even in spite of these difficult times and they know that we’re doing a planned spend down, they were very impressed by the board’s (long-range financial) plan to use these reserves to get through the recession; the board’s plan to make budget reductions for next year to get back on our $3 million spend-down plan; and also the board’s willingness at some time in the future when we think our public is in a better position to go and ask them for a tax increase. But we know that’s in the future somewhere. I wish we knew when those times would be good enough,” he said.
“So they cited all those things and so we’re very pleased to be able to retain that very high bond rating and it will certainly help us. This is exactly when having that kind of sound financial planning and plan in place really pays off.
“And it pays off in the form of a higher bond rating and lower interest rates paid by the citizens of the Lindbergh School District,” Lanane said.
The district’s Aa2 bond rating is “the gold standard, which very few school districts in this nation have,” Superintendent Jim Simpson told the Call.
“It is an outside validation of Lindbergh’s strong financial stewardship and conservative financial stewardship,” he said, adding, “Moody’s was very impressed that we already had a strongly detailed plan to how we were downsizing and meeting our revenue projections of the future. They were very impressed that we understood that we needed a tax-levy increase somewhere in the near future …”
Simpson said the Aa2 rating “really helps sell our bonds and gets a lower interest so that our taxpaying patrons will get a very good deal out of that … The interest rate that you get on your bonds is directly related to perceived risk factors and so having the gold standard for bond rating and Moody’s being the perceived highest quality rating agency all comes together to give confidence to investors to buy Lindbergh Schools bonds.
“And since they’re so highly rated, they’re willing to take a little less interest for security.”