District prepares to sell bonds
March 25, 2009
By Laura Geggel
Now that voters have approved a $27.5 million school bond by 67 percent, the Snoqualmie Valley School District is beginning the behind-the-scenes work of selling its bonds.
At a March 12 school board meeting, Jon Gores of D.A. Davidson & Co. described the bond-selling process.
“The next time you see my smiling face, the bonds will have been committed to by investors,” Gores said.
The bond will tax SVSD residents $0.39 per $1,000 of assessed property value for the next 20 years. Ideally, the bonds will provide the maximum amount of revenue needed by the district for its capital facilities projects.
If all of the bonds sell, then the district will have the cash flow to pay for its projects on a timely basis.
“I want to get you as much money as we can for these projects,” Gores said.
Initially, the district had planned to sell some bonds this year and the rest the following year. Because interest rates have fallen, the district will now sell all of them this spring.
Compared to interest rates in past years, the district should be able to sell its bonds without a hitch. In the late 1980s, interest rates hovered between 7 and 11 percent. Now, rates are about 4.75 percent, vastly lower than the 5.5 percent rates the pre-election campaign had predicted would be in place.
“That’s what is allowing us to sell all of the bonds now, as opposed to having to wait to sell them in a year,” Gores said.
Both the school district’s and state’s credit rating will improve the bonds’ chances of selling. In 1999, the state legislature approved the School Bond Guarantee Program. Because the program required a constitutional amendment, the proposed law was put before voters, who approved it by 60 percent.
The program allows districts to use the state’s credit rating when issuing bonds. If, for some reason the district cannot repay the bond, the state will step in and pay it for the district.
“That piece of mind is very important to the bond brokers,” Gores said.
The state’s current rating is AA1, only one slot below the highest rating of AAA. The district’s rating is A1.
“Your A1 rating puts you in pretty rarified air. Out of the 120 school districts in the state that are rated, only 18 percent of those are A1,” Gores said.
Before the district sells its bonds, it must first publish a preliminary official statement, a document containing information about the district’s finances, enrollment, tax collections, major taxpayers and the like.
Superintendent Joel Aune, Business Director Ron Ellis and Gores will present the statement and more in-depth information to the rating agency Moody’s Investors Service in late April.
Moody’s will then have an analyst review the presentation and rate the bond. A committee at Moody’s will either approve or modify the analyst’s rating in early May.
On the pivotal day, either May 13 or 14, the bonds will receive their interest rates and be sold to investors in denominations of $5,000.
“The reason there are two days there is we want that flexibility to have to change dates if we want to,” Gore said, explaining that if May 13 is a bad day for the economy, the district can push the sale to the next day.
Gores explained what would happen next.
“Early in the morning at about 6:30 a.m. Seattle time, the interest rates are set and that information is electronically disseminated across the country to prospective bond buyers,” Gores said. “We give them two hours to decide whether or not they want to buy your bond.”
The entire process will be over at the start of June.
“What we want to have is just as many bonds as buyers,” Gores said.
Once the money from the bonds rolls in, the district will be able to finance $27.5 million in capital facilities projects. Of that sum, $22.1 will service maintenance repairs across the district, $3.6 will fund 12 new portables for Mount Si High School and $1.8 million will finance the rebuilding of six Mount Si tennis courts across Meadowbrook Way.
Reach reporter Laura Geggel at 392-6434 .221 or lgeggel@snovalleystar.com.
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