Tim Frenz, from Janney Capital Markets, a subsidiary of Janney, Montgomery, Scott LLC, presented two options to the school board at last night's July Combined Meeting. The board made this resolution:
General Obligation Bonds for High School Renovation Project: RESOLVED, That the Board authorizes Tim Frenz of Janney Capital Markets and Jim Webster of Houston Harbaugh to begin preparation of financial documents and legal opinions to issue General Obligation Bonds to complete funding of the High School Renovation Project.
I uploaded the podcast from last night's meeting and it is available
here. While the presentation was long, here are the highlights, as best as I understand. There were two options, both involving wrapping bonds.
Option 1
Using the $1.7 million in the asbestos fund and taking nothing out of reserves, the board would consider financing a $32.9 million bond resulting in $35 million. (5 year phase in). This wraparound option would phase in a .56 mill increase. It reduces the annual payment and wrapping keeps the millage rate lower for the community.
Option 2
Using the $1.7 million in the asbestos fund and using $3 million in reserves, the board would finance a $30 million bond, resulting in a .5 mill increase for this wraparound option. (3 year phase in)
Dale Ostergaard pointed out that the reserves would need to fund five things.
1. PlanCon reimbursement, which won't happen this year either.
2. OPEB
(Other Post-Employment Benefits) reimbursement
3. Maintain the annual capital fund which amounts to $5 or $6 million, to allow for purchasing books, computers, etc.
4. Rifle range funding?
5. The MLEA Grievance
At this point, Ostergaard, Cooper, Birks, Lebowitz, Remely, and Posti opted for Option 1. Scott Goldman, the only fiscally responsible school board member opted for Option 2, based on further clarification from Jan Klein. She has set aside $1 million for the grievance. It could be plus or minus $1 million, but she decided to set aside $1 million. According to Klein, there is approximately $8.5 million available total in all the funds. She felt comfortable taking $3 million from those funds and applying them to the second bond issue. Since Goldman was relying on Klein's expertise, he opted for Option 2.
Posti and Cappucci opted for Option 1.
In the end, it was a unanimous vote to go with Option 1 with the vote scheduled for August 19.
A few observations from last night's meeting:
Thanks goes to Mary Birks for trying to eliminate that one dollar for the wall padding. Good work, Mary! You tried.
Larry Lebowitz gave his usual Rah Rah speech for Klein's excellent work.
Tim Frenz only had enough handouts for the board and had no PowerPoint presentation. He balanced his papers on his chest, pointing to his papers to make his presentation. A resident asked for a copy of his presentation and Mr. Frenz didn't have extra. The same resident asked Jan Klein for a copy and she responded with that she didn't have any extra copies and to File a Right To Know. So much for transparency.
There was no third option presented for level funding, only wraparound options.
We can refinance again starting in 2015 or 2016.
Frenz is a hero for not taking all the money out in 2009.
These bonds will not be an exception for Act 1. The Act 1 Index is getting tighter and tighter.
The drop dead date for the second bond is October - November. Berkabile says October. Jan Klein's sleep is important to her and would sleep better if this was done in August.
This will cost us $3.5-4.5 million to finance.
In addition to Mr. Frenz' presentation, a RTK is needed for Jan Klein's July 1 presentation to the board.
