VANDALIA—At a regular meeting of the Van-Far R-I School District Board of Education on June 16, 2020, a parameters resolution was approved that designated a final terms committee consisting of Tony DeGrave, superintendent, Justin Hopke, board president and Larry J. Hart, chief executive officer of L.J. Hart & Co. It authorized the sale of $1.5 million General Obligation Bonds to its Municipal Bond Underwriter, L.J. Hart & Co. of St. Louis.
“We appreciate the strong vote of confidence we received from local patrons at the election and want to lock in interest rates that are highly favorable,” said Justin Hopke, president of the Board of Education.
These new money General Obligation Bonds were approved by about 81 percent of the voters at the June 2, 2020 election, for the purpose of providing funds for the new elementary school parking lot, HVAC improvements and renovations to the high school restrooms.
The bond marketing process provided the first opportunity to invest to local financial institutions and according to Brad Wegman, vice president of L.J. Hart & Co., the Community State Bank of Missouri purchased $125,000 and First State Community Bank purchased $300,000 of the bonds. This strong local support was very helpful to the success of the financing.
“It is nice that our marketing procedures facilitated this local involvement while still receiving attractive interest rates,” noted DeGrave.
The Board of Education selected the negotiated sale of the bonds in order to capture current market conditions, to be certain that local banks received an opportunity to purchase the bonds, and because the proposed interest rates were fair based upon current conditions in the municipal bond market. DeGrave said that the district did compare proposed interest rates with the national bond indexes and other Missouri issues with a similar rating quality sold at competitive and negotiated sales to be certain that rates for the district’s bonds were favorable.
“Based upon pricing of these other financings, and the national indexes for AA rated General Obligation Bonds our rates were as good as or better than some public sales and other negotiated sales for a similar quality level of bond issue,” DeGrave explained.
The information shared by L. J. Hart & Co. indicated that the bonds are scheduled to mature on March 1, 2031 through March 1, 2040 with reoffered yields ranging from 1 percent to 1.3 percent, and the total interest expense coming in consistent with the original projections.
Because the District is concerned that the final bids for the construction projects are likely to be above the architect’s estimates, the board requested that L.J. Hart & Co. reoffer the bonds by having interest rates above current market levels through the March 1, 2025 call date in order to produce reoffering premiums in the amount of $256,118.50, which represents an increase of $48,124.35 more than the original estimate. The interest income from the bonds is exempt from federal and state of Missouri income taxes and the bonds were available in $5,000 denominations.
These bonds carry an “AA+” rating from Standard & Poor’s Corp. because of the district’s participation in the State of Missouri Direct Deposit Program coordinated through the Missouri Health and Educational Facilities Authority.
The bonds do contain optional redemption (call) provisions on March 1, 2025, at no penalty that will facilitate the reduction of future interest expense in the event of prepayment or a future refunding to lower rates if market conditions make it economically feasible. The financing proceeds were expected to be available to the district by July 9, 2020, and will be promptly reinvested by the district to earn additional interest for use in the completion of the projects. The legal documents to complete the issuance of the bonds were prepared by Lori Lea Shelley, Esq. of Mickes O’Toole LLC, in its role as bond counsel for the district.