I found the article interesting as it related to the conversation I had with Scott Shearer last week (read about it here).
In that conversation I was told Nazareth had one swap and it was fixed rate - 4.99%, but the article reports:
Lou Verdelli, a managing director at RBC Capital Markets, told directors the district's exposure of about 22 percent of its bonds in variable rate/interest rate swaps is acceptable.The other issue from the article notes that while Nazareth is floating a $31M bond to pay for the building of the MS, there may not be any buyers given the current financial crisis.
NASD Business Administrator Bernie Rischoff said the issue could be delayed into early next year, but conditions could, and probably will, worsen by then.
What happens if no one buys the bond?
Shearer, according to the article, indicated they may not and the board might have to consider alternatives, such as a bank loan.
Let's hope we don't wind up with a half built building.
6 comments:
Ross-
I wondering about that too... The article states:
"Currently the interest rate swaps have not gone over the 4.5% budget the district pegged when the bonds were originally underwritten".
So, which is it? Is our 22.5% of debt at a variable rate or is at the fixed 4.99%?
Am I reading this correctly that the district didn't secure the funding for this construction BEFORE it started?
Anonymous-
It couldn't. The district has a limited amount of debt (around $25M) that it can borrow in any one year. The building project was well over our yearly debt limit so they have to borrow the money in "chunks".
Stay tuned. I would think that the last $24M will have to be borrowed at a higher rate - either a higher rate bond or a higher rate bank loan. I just wonder what the difference will be from what we rate NASD budgeted the money at and at what rate we actually get.
Sorry I took so long to post happenings from the board meeting, but here's what I've got:
Believe it or not, but all nine members were present.
I had asked about the change orders in the agenda ($80,400 approx). I asked the total change orders to date now - $206,792. This is 0.4% of the total construction cost. Also, the total contingency built into the budger was $890,000. So, we've eaten through over 20% of the contingency. Good thing is that we're most likely more than 20% through the project.
3 students were honored as National Merit Scholars - big honor. Great job.
Bond Swaps - definitely complicated. My take is that the ~22% exposure we have is to variable rate bonds. This was a $25MM bond at a rate of 4.5% at the time. They budgeted 4.99% I think. The rate stayed low and it has averaged out at just under 4.5% to date. The recommendation right now is to do nothing. It would cost about $2MM to get out of the swap.
The new resolution was passed for the remaining debt - $31MM in total. ~$23MM in new money to finish the school and ~$7MM to refinance old debt. If the market stays bad and they can't get the full bond, thy can issue bonds incrementally, borrow from the general fund (not good) or take out short term loans from local banks until the market opens up (really not good). Hope this works out.
There will be a parent meeting in January for those who have kids going to the 4/5/6 scholl next year, as well as some "parent nights" at the school to llok around, etc.
Board policy #606, Tax Collection, was approved 9-0. See the website for the policy.
The admin will be revising the newly revised facility use policy. Apparently, groups like the PTA are getting charged for holding events, making it impossible to raise money. The board recognized the error and will refund the money and correct the policy to prevent the PTA, booster clubs and the like from getting charged.
Here's the fun part - at the very end of the meeting, Board President Ken Butz passed around a new agenda item to amend the contract with Jennings transportation. This amended contract would have NASD partially reimburse fuel costs to Jennings. HUH? Yes, you heard it right. (editorial comment - the price of gasoline at least is down 30% from the highs, not sure about diesel)
Mr. Maher (voice of reason) said that they agreed in principle to wait on this to think it over. He said Butz "really pulled a stunt" putting this in at the last minute. He insisted that the vote be tabled till next meeting at the least. Also, Mr. Maher contends that this amended contract will cost the taxpayers $400,000 extra.
Enough already, I say. The motion was amended to a motion to table the vote. The vote was tabled by a 8-1 margin (Dr. Marino the only no on tabling the vote).
That's about it. The Jennings contract will no doubt be back next week. It was suggested that they discuss it in open during the regular meeting. Pretty good idea, but I doubt it will happen. Probably not allowed.
That's enough for now. Be sure to show up Monday at 7:30 to be involved in the process. That's the only way to make change happen.
Scott
Reimburse Jennings for fuel costs? Are they kidding me?
There is a contract in place. We agreed to pay X amount for transportation which should include the price of gas.
I don't think it is up to us the taxpayers to make sure that Jennings turns their profit at the same levels as previous years just because the price of gas went up. Which, by the way, it is now down below the average of a year ago.
If this passes, it just tells me the the good old boy network is firmly in place and these board members will continue to take care of their buddies regardless of what it does to the taxpayer.
We have cost overruns on the new building, additional non-essential construction projects, and now this.
Hello, has anyone on the board or the district taken a look at the economy lately? People are hurting financially, yet you are willing to keep piling more on us every time you meet.
One interesting item. It is mentioned that Nazareth had three national merit scholars. Where are their names? Why isn't the district shouting this out?
If they were athletes getting scholarships, it would be everywhere.
These kids did something that deserves the same public recognition that athletes get.
And no, my kid was not one of them so no axe to grind here.
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