Mehlville to save $390,000 with refinancing

Open house for auditorium set to take place this week

By Gloria Lloyd

The Mehlville Board of Education voted unanimously last week to refinance bond-like certificates, saving the district an estimated $369,000 through lower interest rates.

“Basically, the bottom line is we get savings — if we go through with the refinancing — that’s locked in,” Chief Financial Officer Marshall Crutcher told the board prior to the Oct. 24 vote.

The certificates of participation, or COPs, issued in 2004 carry a $7.9 million principal at a current interest rate of 4.43 percent, which would fall to 1.5 percent under the refinanced rates locked in by the district’s current underwriter, L.J. Hart & Co.

Board Secretary Rich Franz noted that L.J. Hart & Co. has been accused of ethics violations.

In September, the Chesterfield-based firm admitted to no wrongdoing but agreed to a $200,000 settlement with the independent regulator Financial Industry Regulatory Authority, or FINRA, for what FINRA alleged were “pay-to-play” ethics violations in which L.J. Hart & Co. gave athletic tickets to Missouri school board members and superintendents, at the same time that it was conducting bond work for their districts.

“I’m a little uncomfortable doing business with you for that reason,” Franz said. “I guess what I’m looking for is a public guarantee that nothing has occurred between you and anyone from our school district that has caused you to stand before us tonight — but at the same time, I don’t want to pass up the opportunity to save some money.”

L.J. Hart & Co. has not given any gifts to anyone associated with the Mehlville School District, said the company’s vice president, Tom Pisarkiewicz.

Superintendent Eric Knost said he has been offered tickets from many financial vendors, but neither he nor any staff member has ever accepted those gifts. The board has a policy that any gifts given to its members must be less than $50 in value, noted board President Mark Stoner.

L.J. Hart has served as the district’s underwriter for several years, but the Finance Committee decided in August to conduct a routine review of requests for proposals, or RFPs, for underwriting services for future refinancing, Crutcher said. L.J. Hart will submit a proposal to continue as the district’s underwriter, but it will remain in place as the underwriter for this round of COPs. The Finance Committee will recommend an underwriter for future COP refinancing from bids it receives over the next month.

The 2004 certificates are callable in March, and refinancing can happen three months before the call date, so L.J. Hart recommends the board refinance in December to take advantage of what could be lower interest rates. The district will save the most in interest on the COPs between 2016 and 2021, when the certificates will mature under the new agreement. That is roughly the same as the previous date the certificates were scheduled to mature, Crutcher noted.

The COPs can be paid off without a penalty as early as 2016, according to the refinancing agreement. If the board does not pay off the certificates early, it will still save an average of $60,000 a year in interest for the life of the certificates.

Previously, the district has used a series of three refundings of COPs to save enough money to build the district’s new auditorium, which is now finished and open to the public for viewing. Knost said he expects the auditorium will come in $150,000 under its $6 million budget cap.

The first official open house showcasing the auditorium for the public was scheduled to take place Wednesday — after the Call went to press. A number of concerts and other events are slated to take place at the auditorium throughout November.

An open house at the auditorium for 15 former board members was so successful that Knost plans to make it an annual event, to get input on current issues facing the district from those who have previously served on the board.

“There are a lot of districts that are going to be envious of what we’ve done (with the auditorium),” school board member Larry Felton said.

The school district’s Public Facilities Authority is a three-member panel that began in 2001 when the district first issued COPs to fund Proposition P. The authority has always had the same three members, Frank Ziegler, Larry Weiss and former school board member Cindy Christopher. Members serve with no term limits.

Weiss, however, moved out of the district in August, so for the first time the authority needed a new member. It sought applicants from the Finance Committee and had interviews with two applicants from that committee.

Although Christopher and Ziegler emphasized that both candidates were qualified and would serve well, they recommended the board appoint Mark Hinsen, due to his background as a certified public accountant and his status as an alum and volunteer for the district. The board unanimously approved Hinsen’s appointment.