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School bonds enter market favorably
By Natalie Shelton
Representatives of George K. Baum & Co., the Liberty school district’s bonding company, were a little worried about putting the district’s $58 million worth of bonds up for sale last week in a turbulent market, a Baum representative told the Board of Education at a special session last week.
But the bonding company received great news, said Dick Bartow, one of George K. Baum’s senior vice presidents.
After George K. Baum representatives and school district CFO Carol Embree met with a ratings analyst from Standard & Poor’s recently, Standard & Poor’s upgraded the district’s general obligation debt rating to “AA” from “A+,” and it raised the district’s lease participation certificates series 2007 to “AA-“ from “A.”
It might be hard for one to sift through such jargon, but it translates to this: Jumping two notches in such a rating drives interest rates down, and it takes away the need for the district to pay $250,000 in bond insurance.
It also means Liberty’s $58 million in bonds entered the market very favorably.
“We saw $75 million in orders for $58 million in bonds, which allowed us to lower interest rates 3 basis points,” Bartow said. “The demand translated into lower interest rates.”
The district will be able to borrow the bonds for 20 years at a fixed interest rate of 4.62 percent, said Greg Bricker, a senior vice president at George K. Baum. Of the $58 million, $1 million has been set aside for local investors, he said. He said the sale looks as if it could yield as much as $62 million, which includes $2 million in interest income.
The George K. Baum representatives had been working with state Auditor Susan Montee to change the registration fees school districts are required to pay the state after they pass a bond issue. Legislation enacted some 70 year ago dictates a district must pay the state $1 per bond, which would have translated into $58,000 the Liberty school district would pay.
The Board of Education received good news this week that the legislature passed an emergency clause, Senate Bill 944, that capped the bond registration fee at $1,000, which saves the district $57,000 because it takes immediate effect, according to Rep. Tim Flook, R-Liberty.
Unless bonding capacity increases from a capped 15 percent as stipulated in state legislation, the school district would be able to borrow no more than $15 million in its anticipated 2010 bond issue, the George K. Baum representatives said.
Many school districts are working with their legislatures statewide to increase bonding capacity; it has been discussed that Missouri might develop a “soft cap” of 20 percent, which is similar to Kansas legislation, that would allow school districts to have a 20 percent capacity that could be increased on a per-district basis if granted by the Missouri Department of Elementary and Secondary Education.
“Districts are starving right now in their ability to fund legitimate facilities,” Bricker said.
Staff writer Natalie Shelton covers Liberty schools. She can be reached at 781-4941 or nshelton@npgco.com.
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But the bonding company received great news, said Dick Bartow, one of George K. Baum’s senior vice presidents.
After George K. Baum representatives and school district CFO Carol Embree met with a ratings analyst from Standard & Poor’s recently, Standard & Poor’s upgraded the district’s general obligation debt rating to “AA” from “A+,” and it raised the district’s lease participation certificates series 2007 to “AA-“ from “A.”
It might be hard for one to sift through such jargon, but it translates to this: Jumping two notches in such a rating drives interest rates down, and it takes away the need for the district to pay $250,000 in bond insurance.
It also means Liberty’s $58 million in bonds entered the market very favorably.
“We saw $75 million in orders for $58 million in bonds, which allowed us to lower interest rates 3 basis points,” Bartow said. “The demand translated into lower interest rates.”
The district will be able to borrow the bonds for 20 years at a fixed interest rate of 4.62 percent, said Greg Bricker, a senior vice president at George K. Baum. Of the $58 million, $1 million has been set aside for local investors, he said. He said the sale looks as if it could yield as much as $62 million, which includes $2 million in interest income.
The George K. Baum representatives had been working with state Auditor Susan Montee to change the registration fees school districts are required to pay the state after they pass a bond issue. Legislation enacted some 70 year ago dictates a district must pay the state $1 per bond, which would have translated into $58,000 the Liberty school district would pay.
The Board of Education received good news this week that the legislature passed an emergency clause, Senate Bill 944, that capped the bond registration fee at $1,000, which saves the district $57,000 because it takes immediate effect, according to Rep. Tim Flook, R-Liberty.
Unless bonding capacity increases from a capped 15 percent as stipulated in state legislation, the school district would be able to borrow no more than $15 million in its anticipated 2010 bond issue, the George K. Baum representatives said.
Many school districts are working with their legislatures statewide to increase bonding capacity; it has been discussed that Missouri might develop a “soft cap” of 20 percent, which is similar to Kansas legislation, that would allow school districts to have a 20 percent capacity that could be increased on a per-district basis if granted by the Missouri Department of Elementary and Secondary Education.
“Districts are starving right now in their ability to fund legitimate facilities,” Bricker said.
Staff writer Natalie Shelton covers Liberty schools. She can be reached at 781-4941 or nshelton@npgco.com.