The Board of Education of the Elsberry R-II School District met on Wednesday, May 8 for their regular monthly meeting. However, with already a great deal to discuss off the agenda, members of the board were able to approve the sale of a $4.5 million General Obligation Bond issue to its Municipal Bond Underwriter, L.J. Hart & Company of St. Louis.
“We appreciate the strong vote of confidence we received from local patrons at the election and want to lock in interest rates that are highly favorable,” stated Sean O’Brien, President of the Board of Education.
These new money General Obligation Bonds were approved by about 80.62 percent of the voters at the April 2 election, for the purpose of providing funds to complete heating and air conditioning upgrades, lighting upgrades and window replacement in the elementary school, middle school and old high school classrooms.
The Board of Education selected the negotiated sale of the bonds in order to capture current market conditions, to be certain that local individual investors and banks received an opportunity to purchase the bonds, and because the proposed interest rates were fair based upon current conditions in the municipal bond market. Elsberry School District Superintendent Tim Reller, Ed.D stated the District did compare proposed interest rates with the national bond indexes and other comparable Missouri issues with a similar rating quality sold at negotiated sales to be certain that rates for the District’s bonds were favorable.
“Based upon pricing of these other financing on May 8, the date firm rates were proposed to the District, and the national indexes for AA+ rated General Obligation Bonds our rates were as good as or better than some negotiated sales for a similar quality level of bond issue,” Dr. Reller remarked.
According to Larry J. Hart, President and CEO of L.J. Hart & Company, the bonds are scheduled to mature on March 1, 2015 through March 1, 2029 with re-offered yields ranging from 0.50 percent to 2.60 percent with the total interest expense coming in consistent with the original projections. 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. These bonds carry an “AA+” rating from Standard and Poor’s Corporation due to the District’s participation in the State of Missouri Direct Deposit Program coordinated through the Missouri Health and Educational Facilities Authority.
According to Mr. Hart the Peoples Bank and Trust Company purchased $100,000, the Community State Bank acquired $500,000 and the CBC Bank bought $515,000 of the bonds to support the District. The Superintendent of Schools, Dr. Tim Reller, mentioned he was pleased efforts were made to accommodate local investors.
“It is nice that our marketing procedures facilitated this local involvement while still receiving attractive interest rates,” Dr. Reller commented.
The bonds do contain optional redemption (call) provisions on March 1, 2017 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 May 21, this year and will be promptly 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 John W. Brickler, Esq. of Spencer Fane Britt & Browne LLP.
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