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Meeting Date:
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3/30/2017 - 6:30 PM
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Category:
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Report of the Committee on Accountability, Finance, and Personnel
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Type:
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Action
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Subject:
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12. Action on a Request for Authorization to Refund or Refinance Certain Bonds from the Neighborhood Schools Initiative
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Strategic Plan Compatibility Statement:
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Goal 3 Effective and Efficient Operations
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Attachments
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File Attachment:
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Background:
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The Administration is requesting authorization to refund $31,865,000 of NSI bonds issued February 1, 2007, to be contingent upon the final refinancing assessment’s yielding net present-value savings (net of all issuance costs and cash contribution to the refunding), as a percentage of the refunding bonds, of at least 3%. The Administration is also seeking authorization for the Board’s President and the MPS Superintendent to sign all documents necessary for the financing.
On August 24, 2000, the Board approved the Neighborhood Schools Plan (NSP), which called for capital expenditures to be funded by borrowing authority approved in the Neighborhood Schools Initiative (NSI) legislation.
On November 21, 2001, the Board authorized the issuance of up to $100,000,000 in bonds to finance school facilities, plus an additional amount of bonds for a capitalized interest fund, for the costs of credit assurance, and to pay issuance costs. Bonds totaling $112,040,000 to fund the NSI were subsequently issued by the Redevelopment Authority of the City of Milwaukee (RACM) on the district’s behalf in February 2002 and November 2003.
On January 26, 2006, the Board authorized the formation of a financing team to prepare for an advance refunding of NSI debt, should financial market conditions allow the district to lower the cost of the NSI debt. On March 30, 2006, the Board approved language modifications to the NSI, enabling legislation to allow debt refunding.
On February 1, 2007, RACM, on behalf of the district, issued $31,865,000 refunding bonds to advance refund $29,260,000 of November 2003 bonds to lower the costs of interest and to provide the district with net present-value savings of approximately $1.25 million. The district was also able to retire $5.1 million of bonds from that same series.
On June 30, 2011, the Board authorized the formation of a financing team to prepare for refunding certain of the NSI bonds, should market conditions allow the district to lower the cost of the NSI debt.
On May 6, 2013, RACM, on behalf of the district, issued $45,570,000 refunding bonds for the remaining February 2002 and November 2003 bonds to lower the costs of interest and to provide the district with net present-value savings of approximately $6.12 million.
On the district’s most recent bond issues (June 30, 2015, and December 1, 2016), the Board authorized the Administration to work with the City and the Financing Team.
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Fiscal Impact Statement:
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This item authorizes expenditures. If approved, the Administration will work with the City and the Financing Team to refund $31,865,000 NSI Series 2007A bonds, which will be refunded and issued with lower debt service cost having a net present value savings (net of all issuance costs and cash contribution to the refunding), as a percentage of the refunding bonds, of at least 3%. The specific amount of debt service cost reduction will be determined by the level of interest rates at the time of sale. In the process, the district will incur costs for the issuance of the new debt. These costs will be funded from bond proceeds. Payment of the issuance cost will be charged to account NSI-0-0-DBT-DW-EACL. Estimated annual administrative cost of $1,500 over the term of the debt, which replaces the current administrative costs of the 2007 Bonds being refunded, will be charged to account ODB-0-0-DBT-DW-EACL.
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Implementation and Assessment Plan
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Current financial market conditions could result in lowering the cost of debt service on the $31,865,000 of NSI Refunding Bonds issued February 1, 2007. Governmental Finance Officers Association (GFOA) best practice threshold for refunding is when net present value savings (net of all issuance costs and cash contribution to the refunding), as a percentage of the refunding bonds, is at least 3%.
Following the Board’s approval, the Administration will work with the City and the existing Financing Team (Piper Jaffray, Katten Muchin Rosenman LLP, Hurtado Zimmerman SC, and Public Financial Management) to assess current refunding $31,865,000 of 2007 NSI Bonds, which are callable on August 1, 2017. If approved, refunding bonds would be issued on or after May 3, 2017.
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Recommendation:
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Your Committee recommends that the Board:
(1) authorize the Administration and the Financing Team to proceed with the refunding of $31,865,000 of NSI bonds issued February 1, 2007, contingent upon the final refinancing assessment’s yielding net present-value savings (net of all issuance costs and cash contribution to the refunding), as a percentage of the refunding bonds, of at least 3%; and
(2) authorize the Board President and the MPS Superintendent to sign all documents necessary for the financing, including Supplemental Indenture of Trust, Supplemental Loan Agreement, Note to evidence the refunding bonds, Tax Compliance Agreement, Bond Purchase Agreement, and other financial documents similar to those of the 2013 refunding.
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Approvals:
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Recommended By:
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Signed By:
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Jacqueline M. Mann, Ph.D. - Board Clerk/Chief Officer
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