December Bond Update
The Keystone Local School District announced the completion of an $11.5 million bond offering, the proceeds of which will help finance the construction and furnishing of Keystone Middle School in time for the 2012-2013 school year without additional increases in taxes.
The district utilized provisions of the American Recovery and Reinvestment Act of 2009 (Stimulus Act) to issue Build America Bonds (BABs) and Qualified School Construction Bonds (QSCBs) for portions of the bond offering. Under the American Recovery and Reinvestment Act of 2009, states and local governments are eligible to issue BABs & QSCBs and receive a federal subsidy payment towards the interest cost of their debt. In Keystone’s case, this subsidy resulted in lower interest cost, thereby reducing its overall borrowing costs. In addition, the district received an upgrade to “Aa3” credit rating from Moody’s Investors Service, assisting in an estimated $722,607 in savings over the life of the bonds.
“We are very excited to receive a rating upgrade, says Treasurer/CFO Phillip Butto, CPA, “It demonstrates to our community that our focus on fiscal responsibility and sound budget practices has significantly paid off for our taxpayers.”Robert W. Baird & Co, Inc. served as sole manager for the offering.
The construction of Keystone Middle School reflects the completion of the second phase of the Master Facilities Plan initiated in 2001.
By issuing stimulus bonds and receiving an improved rating, the district will pay a 4.11% interest rate compared to an interest rate of over 5% if priced as a traditional tax-exempt bond with their prior rating. Over the life of the bonds, the district is positioned to save approximately $1.4 million in today’s dollars. The District was also able to save the taxpayers an additional $1 million in interest expense by reducing the final payment from a 37 year term to a 30 year term.
“Keystone has been committed to serving our students and honoring our no new millage pledge to the community” said Superintendent Jay Arbaugh. “Utilizing this financing package and going to market when we did, allowed us to stay true to that commitment.”
“Baird is pleased to help the Keystone Local School District complete this bond offering and access lower cost financing through the District’s credit rating upgrade as well as utilizing the borrowing options created through the Stimulus Act,” said Jenni Logan, Director in Baird’s Public Finance group and co-banker on the deal. “The offering will allow the District to continue forward on its master plan while saving taxpayer dollars.”