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Board moves to restructure middle school debt, could save district more than $500,000

By James Grob,

The Charles City School District Board of Directors took a step toward possibly saving the district as much as a half-million dollars on Monday.

During the regular meeting the school board voted to approve a resolution setting Dec. 14 as the date for a public hearing on a proposal to issue approximately $8.9 million in school infrastructure sales, services and use tax revenue refunding bonds.

Board Treasurer Terri O’Brien told the board that Piper Sandler (formerly Piper Jaffray) approached the district and several other school districts and suggested Charles City consider refinancing the debt it is paying off on the Charles City Middle School project.

“Our two middle school bonds that we have — issued in 2013 and 2015 — have rates between 2 and 2.5% interest,” O’Brien said. “The new bonds they are issuing now could range from 1.25% to 1.75%.”

O’Brien estimated that the refinancing could save the district $360,000 to $557,000 in interest costs.

The finance committee met with Matt Gillaspie of Piper Sandler on Nov. 13 to discuss refinancing the sales tax bonds, which become callable in 2021, then directed administration and Piper Sandler to proceed. The papers were drawn up by Ahlers and Cooney law firm.

“It’s quite a savings, but it isn’t necessarily a no-brainer,” O’Brien said. “When we refinance, we would get a new call date, which might hinder the issuance of any future debt.”

O’Brien said that as of right now, there is no immediate plan for new debt to be issued. Even if new debt develops in the near future, O’Brien said that Piper Sandler believes refinancing current debt would still work to the district’s benefit financially.

“When you look at the big picture, we have several funds that we spend money out of and that we can borrow money against now or in the future,” said director Scott Dight, who is also on the finance committee. “Right now, it’s the sales tax revenue that’s paying for these bonds, and that’s tied up in paying off the debt for the middle school project.”

Dight said that PPEL funds and funds from a potential public bond could be used for any future debt.

“If we can save that much money in interest payments, it makes sense that we move forward,” he said.

The board also approved the engagement agreement with Ahlers & Cooney to serve as bond counsel for the issuance of the approximately $7,904,000 school infrastructure sales for refinancing the bonds. The fees are estimated not to exceed $17,500 plus related fees for copying, printing and other related expenses estimated not to exceed $500.

The board also approved an engagement letter with Piper Sandler to serve as the placement agent for the refinanced bonds. Fees will depend upon the type of sale, by placement agent or underwriter.

In other business on Monday, the board approved a FRSecure LLC Master Services agreement for the information security risk assessment for $17,000 and security program roadmap for $3,850. A presentation about the security agreement was given to the board at the Nov. 9 meeting.

O’Brien told the board that the estimated cost is $20,850 if both the information security risk assessment are completed. If the district does not receive a second round of COVID-19 funding, the general fund would have to pay through the flexibility funds since there are no general fund technology funds to cover this expense. This expense would require the use of carryover flexibility funds below the $100,000 minimum balance target.

Board President Josh Mack and other board members complimented O’Brien and commented that the program was acquired at a great price.

The board also approved a resolution to give notice of a public hearing on Dec. 14 to consider continued participation in the Instructional Support Program. The board wishes to consider continued participation in the program for a period of five years, commencing in July of 2022, at an amount not to exceed 10% of the total regular program district cost to be used for any general fund purpose.

O’Brien told the board that the purpose of the program will remain the same, although the amount changes from 7% to 10% and the term goes from 10 years to five years.