Fort Smith School Board to vote on timeline for bonds

Projects OK’d in Fort Smith election

FORT SMITH --The School Board will vote later this month on a recommended timeline that calls for issuing up to $90 million in bonds this summer and another $31 million next summer to pay for improvements voters approved in the May 22 millage election.

Issuing the first batch of bonds this summer will allow the school district to lock in favorable interest rates before they rise, as the market is expecting, district Chief Financial Officer Charles Warren wrote in a memo to the board. Key interest rates were raised June 12 by the Federal Open Market Committee.

School Superintendent Doug Brubaker told School Board members during a work session Monday that it appears the Federal Open Mark Committee will raise rates twice more this year and several times next year.

Waiting and allowing interest rates to rise before selling bonds will reduce the amount of money available for construction, Warren said.

Warren cautioned in his memo that while issuing the bonds soon would provide lower interest rates, the district would have to be ready to spend the bond proceeds within three years of the bond issue date as required by law, the memo said.

School officials didn't have definite answers when school board member Bill Hanesworth asked how the money would be spent.

District Chief Operations Officer Terry Morawski said work on the two high schools along with security upgrades throughout the district would take most of the $90 million.

Plans are to renovate Northside and Southside high schools and build new competition gymnasiums and locker rooms for each at a total cost of nearly $80 million. Security improvements could cost about $6 million.

Brubaker said the work schedule for the district's improvements campaign will become better defined when the district hires a project managing firm, for which requests for proposals were being prepared.

Issuing bonds in two phases a year apart would enable the district to spend the $90 million within the three-year deadline and the remaining $31 million by 2022, Warren wrote.

The school board is expected to vote on a resolution at its July 30 meeting to issue the bonds. If all goes as planned, the $90 million in bonds would be sold Aug. 15. The remaining bonds would be sold a year later.

If the bonds are issued this summer, as recommended, municipal adviser Stephens Inc., estimated the interest rate would be 3.67 percent. The interest rate on the remaining $31 million in bonds issued next year would be an estimated 4.17 percent.

Total principle and interest on the total $121 million debt, according to Stephens, would be $204.7 million.

If the bonds are not issued until November, according to information provided to the board, the interest rate on the $90 million bond issue would be an estimated 3.91 percent, and 4.42 percent on the $31 million issue in November 2019. The principle and interest would be $211.1 million, Stephens estimated.

On May 22, voters approved a 5.558-mill property tax increase by a vote of 7,629-4,737, raising the district's millage rate to 42.058 mills. It was the first millage increase in the district since 1987.

The increase in property tax revenue will be used to pay for improvement projects recommended in February by a citizens committee that studied the district's infrastructure and other needs.

NW News on 07/10/2018

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