MOSES LAKE — The Moses Lake School District hopes to have $50 million in school construction bonds sold and in the bank by Nov. 1.
According to Trevor Carlson, a managing director with PiperJaffray, the Minneapolis-based investment bank underwriting the bond issue, the Moses Lake School district has a fairly solid financial position, which should make selling the bonds relatively easy.
“You have a Moody’s (credit) rating of Aa3, which is a couple of notches below the best,” Carlson told members of the Moses Lake School Board at a regular meeting Thursday.
In addition, Carlson said the district has a strong economy, and its endeavor to cut $6.2 million from its 2018-19 operational budget in the face of looming deficits caused by a change in state education funding “looks balanced and prudent.”
The construction bonds were initially approved by voters in February 2017, with 60.03 percent in favor (60 percent was required for approval), and were intended to build a second, 1,600-student high school and one additional elementary school. However, a group of district residents sued to overturn the result, claiming the county auditor failed to follow the law in certifying the election, delaying the final outcome of the election for more than a year.
This year, the Moses Lake School Board decided to alter the purpose of the construction bond to build two new elementary schools and to halve the size of the proposed high school to 800 students.
Carlson said he expects bond service payments to cost district property owners $2.21 per $1,000 in assessed value per year for the next 20 years — the authorized length of the bond issue. Much of the initial bond planning in 2016 assumed an interest rate of under 2 percent, while the interest rate PiperJaffray assumed today is slightly more than 2.5 percent.
The district will be able to reduce the interest rate it will pay lenders thanks to a program that allows it to use Washington state’s Aa1 credit rating, Carlson said.
“We feel very confident that we are in a very good spot, not far off from our projections a year and a half ago,” Carlson said.
Bonds would be sold in $5,000 increments, and anyone is eligible to purchase bonds except members of the Moses Lake School Board. The primary customers would be institutional investors such as pension funds, banks and state and county investment pools. The cost of issuing the first tranche of bonds in October would be about $513,000, Carlson said, and that includes legal fees from the year-long court case.
“That would be financed and capitalized over the life of the loan,” he said.
Carlson said the actual interest rate will be calculated during a 90-minute auction the morning of Thursday, Oct. 11 as investors figure out at what price they are willing to lend $50 million to the Moses Lake School District.
“We have a preliminary idea of the interest rate, we’ll match supply and demand and the market will dictate the price,” he told the Columbia Basin Herald.
Carlson told board members he expects one or possibly two more bond sales in order to raise the entire $135 million authorized by voters in 2017.