School district starts bond sales process
$10 million in bonds sold Thursday saves district thousands of dollars
December 19, 2006
Steamboat Springs — The Steamboat Springs School District sold nearly $10 million in bonds Thursday, beginning the process of rebuilding Soda Creek and renovating Strawberry Park elementary schools.
The district opted to split the bond sales – about $10 million in December and about $19.7 million in 2007 – in an effort to save money. Entities that issue public bonds of $10 million or less in a calendar year are “qualified small issuers” whose bonds are “bank qualified.” Bank-qualified bonds, typically the only type of municipal bonds commercial banks will purchase, are eligible for a lower interest rate.
In November, school district voters approved $29.7 million in bonds to pay to build a new Soda Creek and make improvements at Strawberry Park.
By selling $10 million in bonds this year, the district will save $125,000 to $150,000 in interest, said Dan O’Connell, director of fixed income banking for U.S. Debt Markets at RBC Dain Rauscher Inc. O’Connell was at Monday’s Steamboat Springs School Board meeting to review the bond sale with board members.
“The market was very favorable,” O’Connell said.
Board member Pat Gleason asked why the district doesn’t split the bond sales into three sales of $10 million for the next three years to be bank qualified for every sale, thereby saving an estimated $125,000 on each purchase.
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O’Connell said that could be done, but he advised against waiting until 2008 to complete bond sales because of the possible increase in interest rates.
“The problem I see with doing that is you are looking at 40-year interest rate lows (right now),” O’Connell said.
O’Connell said he plans to return for the Jan. 8 study session to discuss the remaining $19.7 million in bond sales. The district won’t qualify for bank qualification with the increased bond sales, but O’Connell is confident interest rates will remain low.
The current interest rate is about 4.1 percent, which is well below the 6 percent interest rate limit written in the November ballot issue.
O’Connell said the district received an A1 bond rating upgrade, which essentially reflects the district’s unique half-cent sales tax and the health of the district’s finances.
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