It takes money for construction projects to continue throughout the Warren County School District.
By approving approximately $16 million in bonds that will be issued to fund projects at Beaty, Eisenhower and Sheffield, the school board took a step towards continuing those projects on Monday night.
According to a resolution passed by the board authorizing the issuance, the funds are, "for the purpose of paying costs of renovation, repair, rehabilitation and equipping of the school district's Eisenhower Middle School/High School, Beaty-Warren Middle School, Sheffield Middle School/High School, and of other school district capital improvements..." The Eisenhower campus is being renovated and both Eisenhower and Sheffield will be expanded to K-12 facilities.
District Director of Buildings and Grounds Dr. Norbert Kennerknecht informed the board that bids are due for the Eisenhower project by Dec. 19 and that the district will, "soon be seeking bids for the Sheffield addition."
Jamie Doyle from Public Financial Management walked the board through the upcoming bond issuances. "Interest rates continue to hover near all time lows as we gear up to do the next part of your financing," she said. "You were very, very fortunate to qualify for Qualified Zone Academy Bonds for 2011 and 2012 (which allow) you to finance the bulk of the project with no new millage impact and no interest."
"The next step in the financing plan," entails a bond issuance of approximately $9.7 million in 2013 and another issuance of approximately $5.8 million in 2014. Doyle explained that these bonds will be general bond issues with, "relatively small principals until your other debt drops off," indicating that by limiting the issuance to under $10 million the district can qualify for a lower interest rate.
These bonds, unlike QZAB, aren't interest free. "It is estimated at this point" that the $9.7 million issue will have a .7-mill effect on the 2013-2014 fiscal year, she explained. "There after (the district) wouldn't need any new millage increase to support this $9.7 million," said Doyle.
The 2014 issue will have a .08-mill impact in the 2014-2015 budget. At the conclusion of that year, both issues "would then be fully phased into your budget," she added.
The resolution passed by the board on Monday approves bond issues in the amount of $20 million. While the district doesn't plan to issue more than the $15.5 million total, and maybe less if bids for the projects come in lower than expected, the $20 million cap allows for greater flexibility. "We inflate the principal amount and the interest rate because we know we are going to introduce it in two phases," Doyle said.
Bond counsel Tom Tupitza, with the Erie-based firm Knox, McLaughlin, Gornall & Sennett, added that the flexibility allows the district to "ultimately be able to get the best available rate," indicating that adjustments can be made through the bond issue process.
Board Vice-president Donna Zariczny asked if a date had been set for the bond sale and Doyle said that while "subject to market conditions," the sale is "tentatively scheduled for January 17." The board approved the resolution unanimously.
According to a payment structure attached to the resolution, and based on the assumption that a full $20 million is issued which is unlikely, payments will be made into a sinking fund on November 15 and May 15 of each year starting in November of 2013.
In this scenario, annual debt service payments would hover between $1 million and $1.5 million until 2027, rising over $3 million for four years and sliding back under $3 million for the remaining four years of payment.
A sinking fund will help offset borrowing costs. Over the life of the bonds, the district will make payments to the fund, just as though it was gradually repaying the principal amount borrowed. The difference is, since the money is being provided through bond sales rather than a loan, the district will retain the funds in an interest bearing account.