December 4, 2017

R-II hopes to save $1.3 million with bond refunding

STE. GENEVIEVE Ė The Ste. Genevieve County R-II School District Board of Education has approved unanimously a resolution to establish a final terms committee to authorize an advance refunding of the Districtís $2,600,000 Series 2010B General Obligation (Build America) Bonds callable on March 1, 2020 and the $4,200,000 Series 2015 General Obligation Bonds also callable on March 1, 2020.

The board also signed an agreement with L.J. Hart & Company of St. Louis to serve again as the Districtís Municipal Bond Underwriter for the advance refunding transaction.

The actions were taken during a special open meeting Thursday.

The average interest rates for the combined Series 2010B and Series 2015 Bonds is 3.96 percent compared with 2.70 percent for the preferred refunding plan.

According to the information presented by L.J. Hart & Company, this decline in interest rate will produce about $1,321,609 of net savings in future years.

The final terms committee consists of the Board President, Martha E. Resinger; Superintendent Dr. Jeffrey D. Lindsey; and Larry J. Hart, Chief Executive Officer of L.J. Hart & Company.

A rating of "AA+" by the Standard and Poorís Corporation (S&P Global) has been received due to the Districtís participation in the State of Missouri Direct Deposit Program, which is the second highest rating available for municipal bonds.

According to Courtney B. Wegman, Vice President of L.J. Hart & Company, the refunding bonds are going to be initially marketed to local financial institutions the week of December 4-8 in order to grant a priority purchase opportunity to the local banks. The interest for the refunding bonds is exempt from federal and state of Missouri income taxes and the bonds are available in $5,000 denominations.

The refunding bonds mature from March 1, 2021 through March 1, 2032 with expected interest rates ranging from 1.70 percent to 3.10 percent. All of the refunding bonds are subject to optional redemption (call) on March 1, 2021 at no penalty to enable the District to better manage its debt service fund levy to be in a position for future building programs that address the priority facilities needs of the District.

Wegman was very complimentary towards the current superintendent Dr. Lindsey and incoming superintendent Dr. Julie L. Flieg for their collective efforts to promptly gather all necessary current financial and local economic demographic data to move the refunding process along on a fast track.

"This is important because under the proposed Tax Reform Act and Jobs Bill before the United State Congress, advance refundings of all municipal bonds will no longer be permitted on a tax-exempt basis after December 31, 2017," Wegman stated. Once the interest rates for the refunding bonds are locked in at acceptable levels, the final terms committee can execute the legal documents and close the refunding on December 20, 2017.

One of the reasons Dr. Lindsey and Dr. Flieg recommended this refunding plan is that it produced about $508,322 more net interest savings than the second option, which saved about $813,287. Another factor is that its implementation can help the District no longer depend on the Payment in Lieu of Taxes funds it receives from Holcim as a subsidy for the debt service fund payments. This revenue source discontinues after Fiscal Year 2020-21.

"We think it is a good idea to remove this subsidy now and have the debt service fund become self-sufficient," Dr. Flieg remarked.

The refunding plan reduces the final principal payment by three full years from March 1, 2035 to March 1, 2032.

"It is important that we as board members be good stewards of the Districtís financial resources and this refunding plan is consistent with our existing policy," Board President, Martha E. Resinger commented.

With no other official business the special meeting adjourned.