Mehlville school board approves sale of bonds authorized by Proposition T


The Mehlville Board of Education recently voted to approve the sale of nearly $3.9 million in general obligation bonds to refund bonds originally issued in 1997.

The general obligation bonds were issued as part of a debt restructuring authorized by voter approval of Proposition T last November.

In the Nov. 4 election, Proposition T re-ceived 31,203 “yes” votes — 62.17 percent — and 18,985 “no” votes — 37.83 percent.

The debt restructuring authorized by Prop-osition T will transfer roughly 31 cents per $100 of assessed valuation from the district’s debt-service fund to the operating fund. The measure will generate roughly $5.6 million annually for the operating fund. Proposition T will not increase Mehlville’s overall tax rate, but will extend the district’s bonded indebtedness by 15 years — to 2029.

A resolution approving the sale of $3.855 million in taxable general obligation refunding bonds was unanimously approved May 28 by the Board of Education.

The board also voted unanimously to approve a resolution establishing parameters for the future sale of bond-like certificates in an amount not to exceed $7.25 million.

The sale of those certificates of participation, or COPs, was scheduled to be conducted Wednesday — after the Call went to press.

The general obligation bonds being re-funded originally were issued in 1997 and were payable in 2010, Lorenzo Boyd, a senior vice president at Stifel Nicolaus, told the board.

He also told board members Standard & Poor’s had upgraded the district’s bond rating to a AA- from an A+.

“That rating directly translates into a better interest savings for the school district as you kind of move forward for various bond programs that you may want to put on in the future …,” Boyd said. “In the whole state of Missouri, I think there are eight AA- school districts … and then there are seven others rated higher than you. So you’re in the top in terms of the whole state of Missouri in terms of underlining rating, your credit rating …”

Boyd also said the district entered the market at the right time.

“… We went into the market today (May 28) with our anticipated interest rates that we expected and after pricing, we were very surprised and very pleased that we were able to reprice the entire financing for the school district, meaning we lowered the interest rate for the district by on average 30 basis points, 0.003 percent, which equates to about $35,000 in savings,” Boyd said.

“What that means is when we went into market with almost $4 million in bonds, we received too many orders. So we had approximately $16 million of orders for $4 million in bonds,” Boyd continued. So that’s good news. So with that we were able to lower the interest so that we can weed off some of those buyers so that we can lower the interest rate for the district, which translates into major savings. And once we get to that point of having enough orders for actual bonds that we need to sell, then we set the final terms and rates. So we were very pleased with that …”

Actual interest costs for the bonds was “a little over 4 percent,” he said.

The district was not able to use general-obligation bonds to refund all of its outstanding bonds, according Chief Financial Officer Noel Knobloch. That’s why COPs are being used to refund some of the bonds.

“… State law, state regulations indicate that you can only refund general obligation bonds for general obligation bonds if you can show a savings on interest …,” he told the Call, noting that with COPs “… you don’t have a show a savings …”

While there are no savings, the restructuring permits the transfer from the debt-service fund to the operating fund as authorized by Prop T.

At the May 28 meeting, Sean Flynn, an attorney with Gilmore & Bell, the district’s bond counsel, outlined the specifics of the COPs resolution, which established parameters for the sale of the bond-like certificates.

The school district is using the building improvements that were performed under Proposition P, approved by district voters in November 2000, as collateral for the new COPs.

Four series of COPs previously have been issued as part of those improvements, and until the indebtedness is retired, the building improvements are owned by a non-profit corporation, the Mehlville R-9 School District Public Facilities Authority, and leased back to the school district in return for an annual appropriation totaling the amount of the certificate payments.

The new COPs would extend to 2029 that lease agreement with the non-profit corporation, whose board adopted a similar parameters resolution for the COPs.

Regarding the COPs resolution, Flynn said, “… So long as the sale falls within those parameters, the sale has authority to go forward. If the parameters are not met, then we’ll have to come back to get your approval ….”