The Cheney school board dealt with one of the easier aspects of the passage of the recent capital facilities bond — getting the money.
In a presentation to the board at its March 22 meeting, DA Davidson managing director Jon Gores outlined the upcoming steps in selling $52 million in bonds. The key goals in the sale, which takes place April 26, is achieving the total tax rate of $5.42/$1,000 of assessed property value voters expected when they approved the bond proposition Feb. 14, along with a stepped-down tax rate beginning in 2029 as older bonds are paid off.
The district will co-sign on the bonds with the state, using its guarantee program that ensures payment of the bonds should the district default for some reason.
Gores said the short-term bond buyer index has gone up about 1.25 percent since the last time the board received a financial overview. In September 2016, the rate was just over 2.75 percent, but rose to slightly above 4 percent in early December, dipped under 3.75 percent in early January before rising to just over 4 percent in March.
Gores said this is a signal Federal Reserve officials are focusing on interest rates in order to keep inflation in check, something that is also important to bond buyers. And while the short-term rates are up, the 25-year historical rate trend remains down.
Part of the reason for this is that after some initial volatility from the conclusion of the recent presidential election, markets have “figured out” that all of the election promises centering on issues that affect financial performance such as tax reform and health care won’t happen quickly. Gores added such stability could change, however.
“Right now in the bond market, we’re one tweet away from volatility,” he said.
The sale taking place on April 26 is essentially what Gores referred to as “handshake deals;” verbal commitments to purchase bonds, mainly from insurance companies. Money won’t change hands until May 22 after everything is finalized.
“If we have more orders than bonds to sell, we can actually go back and negotiate the rate,” Gores said.
In related business, the board voted unanimously to approve, and signed the official documents concerning the system of registering the general obligation bonds and how they will be issued.
In other agenda items, the board unanimously approved the selection of OAC, Inc. as the construction management firm for the upcoming bond projects. Superintendent Rob Roettger said they interviewed two firms, and OAC emerged as the interview team’s recommendation to the board. Roettger said OAC has experience with projects utilizing the two forms of project management and design being considered by the board: design/build or general contractor/construction manager.
“Basically, it comes down to what kind of services you want,” he said.
In response to a question from Director Marcie Estrellado on what separated the two firms, Roettger said the recommendation boiled down to OAC’s experience in the local construction market. The firm also served as construction manager on the district’s Cheney and Westwood middle school projects as well as Snowdon Elementary School.
John McCallum can be reached at [email protected].
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