The Little Rock School District this week received four bids to underwrite the issuance of second-lien bonds, the proceeds from which will be used for a new high school and improvements to other campuses.
Bank of America Merrill Lynch offered the lowest bid, which was an interest rate of 2.775189 percent on the bond issue. That bid will be submitted to Arkansas Education Commissioner Johnny Key later this month for formal acceptance.
Key acts as the school board in the district that has operated under state control without an elected school board since January 2015.
The district would net $93,291,592 in project funds as a result of the winning bid, Kelsey Bailey, the district's chief financial officer, said Thursday in announcing the response from investors on the construction bonds. That is more than the $92,055,000 initially anticipated, Bailey said, in part because of a lower-than-expected underwriter, municipal adviser and bond counsel fees associated with the bond issue.
The receipt of the bids is the latest step in a monthslong, often-contentious process to generate funds to help pay for a new high school in southwest Little Rock and make other improvements at district schools.
Contingent on Key's approval, the district will close on the bond issue Sept. 23.
A groundbreaking ceremony for the new high school that will replace McClellan and J.A. Fair high schools is set for Oct. 2.
The school for as many as 2,250 students is scheduled to open in August 2020 on a site between Mabelvale Pike and Mann Road, behind the Home Depot and Wal-Mart stores. The district will use $55 million to $60 million from the bond issue, along with district savings and state desegregation aid, for what is expected to be a $90 million campus.
The bond-funded improvements at the district's other campuses will include new roofs and mechanical systems, renovated restrooms, fire alarm systems, parking lot repairs, added air conditioning in kitchens and upgrades to athletic fields.
In addition to the low bid from Bank of America Merrill Lynch, the other bids on the Little Rock bonds were 2.888520 percent from Robert W. Baird & Co.; 2.939999 percent from Wells Fargo Bank, National Association; and 3.300161 percent from Morgan Stanley & Co.
The Little Rock district earlier this year asked voters to approve a 14-year extension -- from 2033 to 2047 -- on the levy of 12.4 of the district's overall 46.4-mill property tax rate as a way to finance $160 million for campus projects.
Voters rejected the tax extension at a May 9 election.
The Arkansas Board of Education -- at the request of the district and over the objections of some district residents -- authorized issuing second-lien bonds to raise a lesser amount for building projects.
Second-lien bond issues do not require voter approval and are repaid with debt-service revenue that a district receives over and above what the school system needs to repay its existing debt.
The second-lien bonds do not constitute an increase in anyone's property tax rate.
The district plan is to repay the bond debt over 16 years with money generated by the already levied 12.4 debt-service property tax mills.
The existing 12.4 mills generate about $43.1 million a year, of which $13.5 million is earmarked for already existing bond-debt payments. The yearly surplus of almost $30 million is used to meet other district operating costs, including maintenance, equipment, salaries and utilities.
That surplus can also be used to finance new debt. The Little Rock district will be helped in paying off the larger bond debt with revenue from expected increases in the assessed value of property in the district.
The assessed value in the district has increased an average of 3.41 percent per year since 1998 despite overall property value declines in a couple of those years, according to data from the district's financial adviser, Stephens Inc.
Mike Poore, the district's superintendent, has said that the second-lien bonds will not put the district in any financial distress as the district is in a "pretty good financial situation."
Earlier this summer, the Pulaski County Special School District board accepted an interest rate bid of 3.734965 percent, which was the lowest of three bids on a $65 million bond issue for the expansion of Sylvan Hills High in Sherwood.
Like the bid on the Little Rock bonds, the low bid was from the Bank of America Merrill Lynch.
Metro on 09/01/2017