Board Approves Sale of $9,600,000 Lease Certificates of Participation on June 28, 2021 (5 Bids Received) with $82,850 Improvement over the June 8, 2021 Projections
At a regular meeting of the St. Joseph School District Board of Education on June 28, 2021, sealed bids were opened for the purchase of the $9,600,000 Lease Certificates of Participation issue. Five (5) bids were received from interested commercial banks and investment banking firms for the purchase of the Series 2021 Certificates. The low bidder for the certificates was Country Club Bank, with reoffered yields ranging from 0.30% to 0.65% as the interest rate on all the certificates was set at 2.50%. Other bidders besides Country Club Bank were First Banker’s Banc Securities, Inc., Robert W. Baird & Co., Inc., Commerce Bank, and KeyBanc Capital Markets. The purpose of these certificates is to provide funds to install, replace, and update the heating, ventilation, and air-conditioning (HVAC) systems in the Lafayette, Central, Benton, and Hillyard buildings. The HVAC upgrades have remained a priority project for the District, originally proposed to be completed with the $107,000,000 bond issue on the April 6, 2021 ballot. However, by utilizing the government approved reimbursements of Elementary and Secondary School Emergency Relief (“ESSER”) Funds allotted to the District for COVID-19 relief and improvements, the District can complete these projects with no additional tax increase. The District anticipates accomplishing approximately $30,000,000 of HVAC updates with only $9,600,000 of upfront funding, assuming timely reimbursements of the ESSER funds. The cash flow analysis prepared by L.J. Hart & Company indicates a strong likelihood that the District can prepay all of the Series 2021 Certificates at no penalty on April 15, 2023 due to reimbursement of the costs by the ESSER funds.
The Superintendent of Schools, Dr. Doug Van Zyl, expressed satisfaction with the number of bids received and with the reoffered yields that were proposed by Country Club Bank. “The reoffered yields obtained as a result of the current market are going to be highly beneficial for the long-range plans of the District,” Dr. Van Zyl 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 resulted in total reoffering premium that is $82,850.85 higher than our projections from June 8, 2021.” The financing plan was developed for the District by its financial advisor, L. J. Hart & Company of St. Louis, Missouri.
According to L. J. Hart & Company, the certificates are scheduled to mature on April 15, 2024 through April 15, 2031. The certificates carry an “A” rating from S&P Global and the District has an “A+” issuer credit rating from S&P based on evaluation of its overall credit worthiness. The certificates contain an optional redemption (call) provision on April 15, 2023 at no penalty. This two-year call feature accommodates the anticipated full reimbursement to the District of the ESSER Funds from the U.S. Treasury to prepay the certificates at that time.
The Assistant Superintendent of Business and Operations, Dr. Gabe Edgar, stated that it is important for the Board of Education and general public of the St. Joseph School District to understand that the $30,000,000 of HVAC improvements once fully reimbursed by the ESSER funds means that the taxpayers of the District will not have to pay for them. “It represents a tremendous windfall and will allow us to focus in the future on our new construction and additional facilities needs,” Dr. Edgar stated.
The financing proceeds are expected to be available to the District by July 7, 2021 and will be promptly reinvested by the District to earn additional interest for use in the completion of the projects. The legal documents to complete the issuance of the certificates were prepared by Rick McConnell, Esq. of Armstrong Teasdale, LLP in its role as bond counsel for the District.
In her closing remarks, the Board of Education President, Tami Pasley, thanked all the team members who worked hard to make the favorable financing opportunity happen within a short time window. “It represents excellent teamwork and will prove to be very beneficial to our educational environment for the students and teachers, as well as an economic gain for our patrons,” Ms. Pasley said.