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May 24, 2019

5/1/2019 12:03:00 PM
School District 65 Starts Process to Issue $5.5 Million in New Bonds
By Larry Gavin

At the District 65 School Board meeting on April 22, the Board approved taking preliminary steps to issue up to a maximum of $5.5 million in working cash bonds, the proceeds of which would be used solely for capital projects – some of which are already contemplated for the summer of 2020.

By issuing bonds, the District is, in essence, borrowing money from the buyers of the bonds.

Under the plan, the issuance of the new bonds would be part of a refinancing of existing bonds issued by the District in 2011 – the Series 2011-A bonds. The bond documents give District 65 the right to call – or redeem – the Series 2011-A bonds toward the end of this year, said Raphael Obafemi, Chief Financial Officer of the District.

Mr. Obafemi said if the District calls the Series 2011-A bonds this year, it can pay them off by issuing new bonds at a lower interest rate. If the District does this and keeps the maturity date the same, the District will save about $5.5 million, he said.

Elizabeth Hennessy, a representative of the District’s financial advisor Raymond James & Associates, told the School Board that if it takes this approach it can issue new bonds up to about $5.5 million and stay within the limits of its Debt Service Extension Base (DSEB). She said the cost of the new $5.5 million in bonds would be paid “primarily out of savings from bonds that would be refunded this fall.” She confirmed that this would not increase the District’s debt service payments beyond what they are today.

In order to issue up to $5.5 million in additional bonds without a referendum, Ms. Hennessy said the Board must issue a Resolution of Intent to issue the bonds, and then post notice of its intent. If within 30 days, 10% of the registered votes in the District sign a petition asking for a referendum, then the District would need to seek approval to issue the additional $5.5 million in bonds in a referendum.

On April 22, the Board adopted a Resolution of Intent to issue up to $5.5 million in new bonds, and it scheduled a public hearing on the question for May 20. In August the Board would need to approve a resolution approving the parameters of a bond issuance, and it is contemplated that the bond refinancing would close in mid-October. 

As part of the referendum in April 2017, the District said it would allocate $1.25 million from funds approved in that referendum for capital projects each year. In light of the District’s DSEB, it appears that $1.25 million per year is the maximum amount that will be available for capital projects for some time unless the District is able to issue additional bonds when it refinances existing bonds in the future – which Ms. Hennessy said may be possible in 2023 and 2024 – or the District obtains voter approval to issue additional bonds in a referendum.

At an April 8 Finance Committee meeting, Dr. Goren said the District is facing $105 million in capital needs in the future.

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