Favorable interest rates could translate into a substantial savings to taxpayers as USD 257 prepares to build new facilities. Depending on how the bidding process goes, the district might be able to set a lower tax rate and save about $5.57 million compared to earlier projections.
Representatives from George K. Baum & Company helped school board members on Monday to start the process of selling bonds to build a new elementary school, new science and technology building at Iola High School and new heating, ventilation and cooling systems for Iola Middle School. Voters approved the bond issues in April, authorizing the district to spend up to $35.43 million for the three projects.
The board also decided to begin a process to hire a contractor to oversee the construction process and work with SJCF Architects through the design phase.
EARLY ESTIMATES for the school bond project predicted the district would lock in interest rates around 4.5 percent, Steve Shogren of George K. Baum told board members. Those cost estimates were provided to voters to help them decide the school bond issue. Shogren said previously he used a very conservative figure, expecting the interest rate might be more favorable when the bonds were actually sold.
Financial analysts expected the Federal Reserve to raise interest rates in the fall of 2018 but instead the Fed suspended those plans and left rates unchanged.
Shogren now estimates the district will lock in a rate of about 3.75 percent, though the bidding process will take about a month and rates could change in the meantime.
But if his estimates hold, the district could save about $5.57 million over the course of the 30-year bonds. The mill levy, or taxing rate, could drop from 21.72 mills to less than 20 mills. That means taxpayers will pay slightly less than originally projected.
Bids for the bonds will be opened June 10.
Shogren also asked school board members to decide whether to ask local banks to take deposits or reinvest some of the accounts. The board will receive about $700,000 when the bids are approved, with the remaining balance released later that month. The district will need to invest the money until it?s needed to pay for construction, design, land purchases or other needs.
The board also needs to decide how they might handle regulatory requirements and special offers like amortizable bond premiums, sometimes up to $5 million, that can be used to help pay the interest over the life of the bond. If such an offer is made, the district would need to decide whether to lower the amount of the bond (which would lower the mill levy) or keep the bond the same and use the premium as contingency funds.
?Our primary responsibility is to make sure we provide the lowest mill rate for your taxpayers,? Shogren told the board. ?If you want to keep some of the premium as a contingency, I don?t think that?s a problem as long as we don?t endanger the mill levy.?
Board members said they would make those decisions at their next meeting, rescheduled because of Memorial Day to 6 p.m. Tuesday, May 28.
