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School Board discusses Plan of Finance for $4.5M borrowing
Approved by referendum
North Crawford

NORTH CRAWFORD - After tasting the sweet success of two successful referendums on the November 8 ballot, the North Crawford School Board moved into the implementation phase at their November 16 meeting.

Kevin Mullen of Baird Public Finance attended the meeting, and guided the board through discussion of their approach to issuance of a $4.5 million municipal bond to be used for the districts building and grounds maintenance and improvement projects.

“Because you are a school district, you are tax-exempt, and eligible to enter the municipal bond market,” Mullen told the board. “In identifying your plan of finance, you want to achieve your advertised debt mill rate target, minimize the total cost of interest paid, minimize your interest rate risk, and capture as much interest income as possible.”

Mullen said that before the district could enter the municipal bond market, it would be necessary to obtain a bond rating for the district, at a cost of $12-15,000. A bond rating, he explained, is crucial to ensure that the district be positioned to get the best interest rate possible for their loan.

He emphasized that the strategy he would recommend would also give the district the most flexibility about entering the bond market when the interest rates appeared to be most favorable. He explained that the soonest the district could enter the bond market would be March 1, 2023, to ensure the district would have the maximum time of 20 years to service the debt.

“For these reasons, I encourage you to pursue short-term, six month financing for the $4.5 million so that you hold the funds, earn between $2,500 and $3,000 per month in interest that can be put into the project, and are poised to enter the bond market at the most advantageous moment,” Mullen said. “This will give you time to obtain your rating and to watch the bond market and interest rates.”

Mullen said that school districts can keep investment income from borrowing as long as the borrowing amount is less than $15 million. He said that once the district borrows the money, it must be spent within three years.

“As far as a goal for timing, I’d like to see you aggressively pursue your rating, enter the bond market in February, and close in March,” Mullen told the board.

Mullen said that at the board’s December 21 meeting, he would ask the board to approve the final Plan of Finance, approve a proposal for interim borrowing, and approve a resolution allowing designated board and staff to move into the bond market at the most advantageous moment without having to wait for a meeting of the full board.

Board members Ed Heisz and Judy Powell questioned the need for the short-term borrowing, asking if it is really necessary or advantageous to the district.

“The short-term borrowing will position the district to earn investment income on the amount before entering the bond market,” Mullen reiterated. “It will also best position the district to enter the bond market at the most advantageous moment.”

Heisz asked if it was necessary to borrow the full amount up front, or if they should only borrow the amount needed for the roof and window projects which will be undertaken in summer of 2023.

“You likely will take on more projects sooner in order to achieve economies of scale with the work,” Mullen said. “For this reason, it would not be advantageous to borrow the money in piecemeal increments.”

Board member Jerry Coleman asked if the district would have the opportunity to renegotiate the interest rates or be locked in to the interest rates available in early 2023 for the entire 20 years of the loan.

“Municipal bonds typically have an eight-year call, which allows the borrower to pursue a more advantageous interest rate,” Mullen said. “This option is available to the borrower, but not the lender.”

Mullen showed the board a chart depicting AAA rated municipal bond interest rates for the last 30 years. He pointed out that over that time interests rates have been much higher than current rates in the 1990s, and also lower than current rates, and that they fluctuate. He said that it is unlikely, given the size of the community that North Crawford serves, that the district will qualify for AAA rating, but he hopes for another ‘A-level’ rating.

In other business

In other business the board:

• honored Agnes Carstens for her successful cross country season, her third place finish in sectional competition, her 45th place at state with a time two minutes faster than her personal best, and being recognized as Ridge & Valley Conference ‘Girl Runner of the Year’

• heard that ‘Newton,’ the district’s new therapy dog had a “tough first day in the district,” and so was unable to attend the board meeting

• heard in public input from Tracy Jacobus who requested the district be more proactive in communication about changes in the schedule for athletics games and practices, and refrain from scheduling practices on Sundays, which she said are sacred to her family

• heard that elementary staff had benefited from an in-person trainer from the company that supplied the districts new English language curriculum

• heard that the district will participate in a gifted and talented research study, which will provide collaboration in the effort from outside the district

• approved the new ‘Silver Cord’ program for high school students who will be recognized at graduation by wearing a silver cord if they complete 160 hours of volunteer service during their high school career

• Superintendent Brandon Munson said that he and Harry Heisz had met last week with FEH Design and Kraemer Construction to begin moving ahead immediately in developing specs before letting bids for the roof and window repair projects for the school building

• Munson reported that he would call a meeting of the Buildings and Grounds Committee of the Board in early December to discuss other projects that might be undertaken on the building and grounds, prioritize them, and then make a detailed recommendation to the full board

• last, Munson responded to a question from Jerry Coleman, and confirmed that he will begin working on open enrollment issues in the next few weeks

• approved vetted district volunteers for the 8th grade trip to Washington D.C. and the Spring Break band trip

• approved Ray Strong as assistant high school girls basketball coach.