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School bond sale goes better than expected

The Park Rapids School Board awarded the sale of a $25.74 million bond series on Feb. 6 to low bidder Baird of Milwaukee, Wis.

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A bond sale-day report presented to the school board on Feb. 6, 2023 shows that debt service tax rates for the Park Rapids Area Schools are now expected to run significantly lower than expected at the time of the district's 2021 bonding referendum (see the red dashed line).
Contributed / Ehlers, Inc.

A $25,740,000 bond sale had 14 bidders Feb. 6 to fund ongoing school facility improvements and to refund the maturities of a 2014 bond series.

“We generally like to see three (bidders),” said Jodie Zesbaugh with Ehlers, Inc. in a sale-day report to the Park Rapids School Board. “I think last year we got seven, which we were excited about.”

As Zesbaugh reminded the school board, this was the second of two sales under the bonding authority approved by voters in November 2021.

She said the district was helped by a AAA rating through the Minnesota Credit Enhancement program and an underlying S&P Global rating of A+. She credited Superintendent Lance Bagstad and Business Manager Kent Fritze with doing well on the rating call.

Zesbaugh said the sale result was good news for the school district, with even the high bid of 3.3248% interest falling considerably below the pre-sale estimate of $3.9%.

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Low bidder was Baird of Milwaukee, Wis., for 3.194%.

“Principal and interest is about $600,000 less than our presale estimates,” said Zesbaugh. “We also got a much larger premium than expected, so another $1 million for project costs. And we saved a little bit more on the refunding component. So, excellent news all around.”

The closing date of the sale is March 2, she said.

Ehlers’ sale-day report shows the bond sale featured a reoffering premium of $2,239,980, annual reoffering yields ranging from 2.11% to 3.8% over the next 20 years, and a net interest cost of $7,971,288 for a total obligation of $35,600,660.

There was interest in the sale from throughout the country, Zesbaugh noted, with additional bidders including banks and trading firms based in Minneapolis; New York, N.Y.; Milwaukee, Wis.; Chicago, Ill.; Cincinnati and Cleveland, Ohio; Charlotte, N.C., Kansas City, Mo.; and Dallas, Texas.

As a result of the sale, Zesbaugh reported, over $23.4 million will be deposited to the school’s construction fund, about $1 million more than expected because of the large premium.

Meanwhile, $4.2 million will be deposited to the refunding fund for the 2014 bond series. Zesbaugh said this will provide savings totaling over $54,000 on the 2014 bonds.

“That allowed us to move some interest up to that year and save some interest cost, too,” she said, adding that while the funds are in escrow they will earn interest at a rate of 4.61% for a total of $17,355.

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Comparing the pre-election estimate of a debt service tax rate of 16.32%, Zesbaugh reported the district’s actual, payable 2022 debt service levy will be 15.62%.

Her table of estimated tax levies for the lifetime of the debt showed this rate dropping annually until the debt is retired in 2043, with plateaus 12.9-13.4% range and between 9 and 10% before dropping to 6.44% in the final year.

School board member Clayton Hoyt made a motion to award the sale to Baird, and the motion passed unanimously.

Robin Fish is a staff reporter at the Park Rapids Enterprise. Contact him at rfish@parkrapidsenterprise.com or 218-252-3053.
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