District 113 Board Selects Referendum Financing Option

The District 113 Board of Education finalized the debt structure of its $89 million
referendum bond at Monday night’s Board meeting.

Ever since the referendum was successfully passed by the District 113 community in April, Board members have been meeting with its financial advisor PMA to analyze varying debt scenarios. PMA presented the Board with multiple scenarios at the previous Board meeting, which were narrowed down at Monday night’s meeting when Board members unanimously voted for one plan.  

District 113 plans to issue $49 million in bonds in 2013.

“The current environment provides very attractive and compelling long term financing which will enable us to invest in and update our facilities at historically low interest rates,” David Small, District 113 Board member, said.

“The challenge is timing – borrowing the entire amount now would lock in these low rates but would cause us to incur higher net borrowing costs before we would
actually need the capital to pay for construction.  Waiting until we need the capital to issue the bonds would expose us to potentially higher interest rates which could significantly increase the cost of the project.”

District 113 plans to issue the remainder of the bonds in $10 million increments over each of the next four years.

“We would like to take a conservative approach and issue about half of the bonds now to lock in the current low interest rates and then issue the balance of the bonds over time to more closely match the District’s cash flow needs and to take advantage of certain federal incentives which will further lower our financing costs,” Small explained.

“We will continue to monitor the municipal bond market and conditions. If it appears that there is sustained growth in the economy or the Fed is positioning to be less accommodating, we will re-evaluate our plans and consider the possible issuance of the remainder of the bonds.”

The Board is also considering a 25-year maturity duration for the bond sale. Current legislation allows for a 20-year maturity duration; the District is seeking
legislative approval to increase the maturity duration to 25 years.

A 25-year time frame would put less of a tax burden on District 113 residents because payments each year would be reduced. In addition, the Finance Study Group recommended District 113 seek a 25-year maturity duration from legislators, as well as the fact that the 25-year time frame better matches the life expectancy of the renovations.

The Board will find out whether the District was granted a 25-year maturity duration later this spring.

The Board approved financing plan upholds the promise District 113 made regarding the tax rate cost to individual property owners. According to PMA, the tax rate may even be lower than estimated during the District’s referendum campaign.