The Lonedell R-XIV board of education approved the sale of $1.25 million general obligation bond to its municipal bond underwriter, L.J. Hard & Co. of St. Louis, at the district’s July’s board meeting.
“We appreciate the strong vote of confidence we received from local patrons at the election and want to lock in interest rates with reoffered yields that are highly favorable,” said Brad Rucker, president of the school board.
The bond offering was approved by approximately 85 percent of the voters at the June 2 election. Proceeds from the sale of the bond will be used for safety and security measures at all school buildings, including secure entrances, cameras, telephone and intercom/bell systems, and to complete upgrades to the HVAC systems.
The bond marketing process provided the first opportunity to invest to local financial institutions and, according to Brad M. Wegman, vice president of L.J Hard, the F&M Bank acquired $100,000, United Bank of Union purchased $400,000 and the First State Community Bank bought $250,000 of the bonds.
Other broker/dealer firms also participated in the distribution of the bonds.
“It is nice that our marketing procedures facilitated this local involvement while still receiving attractive reoffering yields to the March 1, 2025, call date,” said District Superintendent Jenny Ulrich.
The board selected the negotiated sale of the bonds in order to capture current market conditions, to be certain that local banks received an opportunity to purchase the bonds and because the proposed interest rates and reoffered yields were fair based upon current conditions in the municipal bond market.
Ulrich said the district did compare proposed interest rates and other Missouri issues having a similar rating quality sold at competitive and negotiated sales to be certain that rates for the district’s bonds were favorable.
The information shared by L.J. Hart indicated that the bonds are scheduled to mature on March 1, 2023, through March 4, 2040, with reoffered yields, ranging from 0.600 percent to 1.075 percent, with the total interest expense coming in consistent with the original projections.
Due to the district being concerned the final bids for the construction projects are likely to be above the architect’s estimates, the board requested L.J. Hart reoffer some of the bonds by having interest rates above current market levels through the March 1, 2025, call date in order to produce reoffering premiums in the amount of $135,697.
This represents an increase of $32,362 over the original estimate. The interest income from the bonds is exempt from federal and state of Missouri income taxes, and the bonds were available in $5,000 denominations.
The bonds carry a “AA+” rating from S&P Global due to the district’s participation in the State of Missouri Direct Deposit Program, coordinated through the Missouri Health and Educational Facilities Authority.
The bonds contain optional redemption (call) provisions on March 1, 2025, at no penalty that will facilitate the reduction of future interest expense in the event of prepayment or a future refunding to lower rates if market conditions make it economically feasible.
The financing proceeds are expected to be available to the district by Aug. 11, 2020, and will be 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 bonds were prepared by Lori Lea Shelley, Esq. of Mickes O’Toole, LLC in its role as bond counsel for the district.