$1,777,244 of Future Interest Saved

SJSD Saves $1,777,244 of Future Interest Expense by Refunding Bonds
Posted on 11/21/2020
Future Interest Graphic

(November 23, 2020) –  At a regular meeting of the St. Joseph School District Board of Education on Monday, Nov. 23, 2020, sealed bids were opened for the purchase of the $6,170,000 General Obligation Refunding bond issue. Eight (8) bids were received from approximately ten interested commercial banks and investment banking firms for the purchase of the Series 2020A Refunding bonds. The low bidder for the bonds was First Bankers’ Banc Securities, Inc., of St. Louis, Mo with an average effective interest rate of 0.93% which compares favorably with the 4.00% rate the District is presently paying on the Series 2014 Bonds.

The Assistant Superintendent of Business and Operations, Dr. Gabe Edgar, expressed much delight with the number of bids received and with the effective interest rates that were proposed.  “The interest rates with very low reoffered yields to the investors occurring as a result of the current bond market are going to be highly beneficial for the long-range plans of the District,” Dr. Edgar remarked. "It appears from these reoffered yields accompanying the low interest rates that our good name with the Missouri municipal bond market proved to be helpful as the actual winning bid produced about $121,354 more savings than our projections from one month ago.”  The financing plan was developed for the District by its financial advisor, L. J. Hart & Company of St. Louis, Mo.  The goal was to take advantage of the more favorable interest rates presently available while still preserving considerable flexibility for the District to present additional building programs in the future.  The refunding bonds are to prepay on March 1, 2021 the $6,280,000 callable portion of the Series 2014 bonds.  This refinancing achieves a net savings in future interest expense of about $1,777,244. This $1,777,244 plus the approximate savings of $2,425,470 from the District’s prepayments completed over the last two years brings the total savings to $4,202.714.

Other bidders besides First Bankers’ Banc Securities, Inc., for the Series 2020A Refunding bonds were Commerce Bank, Piper Sandler & Co., Country Club Bank, Northland Securities, Inc., Robert W. Baird & Co. Inc., FHN Financial Capital Markets and Raymond James & Associates, Inc.

Larry J. Hart, Chief Executive Officer for L.J. Hart & Company, complimented Assistant Superintendent of Business and Operations, Dr. Gabe Edgar and  Superintendent Dr. Van Zyl for their prompt and thorough preparations to supply the data necessary for the rating applications and Official Statement as well as the Board of Education for its enthusiastic support of implementing the current tax exempt refunding and due to the March 1, 2021 call feature on the original Series 2014 bonds.  The Refunding Bonds carry a “AA+” rating from S&P Global due to the District’s participation in the Missouri Direct Deposit Program with an underlying Issuer Credit Rating of “A+.” According to Mr. Hart, the refunding is possible due to the lower interest rates currently available, which are actually the lowest interest rates in sixty years. The fact that the Series 2020A Bonds can be prepaid (called) at no penalty within ninety days of the call date as required by the 2017 Tax Cuts and Jobs Act, and the solid attitude of the State of Missouri and national bond markets are assigning to the credit worthiness of the St. Joseph School District.  

If interest rates decline in the future, the District can capture the full benefit by prepaying principal because the bonds have an optional redemption (call) provision of 
March 1, 2025 at no penalty.  The financing proceeds are expected to be available to the District on December 15, 2020 to be set aside for the March 1, 2021 call of the 
Series 2014 Bonds. 

The Board of Education approved the bond resolution and awarded the sale of the Series 2020A Refunding Bonds to First Bankers’ Banc Securities, Inc.  The President of the Board of Education, Tami Pasley, stated that it was great to be able to save the taxpayers of the District an additional $1,777,244 of future interest expense and the extra savings above the original projections of $121,827 is a wonderful gift of the market to our taxpayers.  “We are pleased to be able to add another $1,777,244 to bring the total savings from prepayments to $4,202,714 since 2018,” Ms. Pasley remarked. 

The legal documents were prepared by Rick McConnell, Esq. of Armstrong Teasdale, LLP in its role as bond counsel for the District.

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