Tuesday’s special school board meeting for approving bonds

Well, there appears to be an emergency PCSD school Board meeting coming up tomorrow (Tuesday), but it’s not for the purpose I hoped. Regardless, let’s look at what’s on tap.

The only topic on the docket is approving the PCSD’s use of lease revenue bonds to facilitate $42 million in additional construction of our schools. So, what’s a lease revenue bond and how is it different from a normal bond?

First a caveat. I am not a finance expert. So, hopefully, this will generally get it right.

When the $79 million school bond was passed by voters in 2021, it was announced that the district would also seek $40 million in additional monies through a “lease revenue bond” which is a different type of funding vehicle. The $79 million bond is categorized as a government obligation (or GO) bond. A GO bond has to be passed by the voters and usually has a lower interest rate because it isn’t risky. That’s what the public overwhelmingly passed in November.

The lease revenue bond is different. It is more complicated. Effectively a government organization creates a “local building authority” or LBA. The LBA then issues bonds and the school district leases the land/facilities from the LBA. The lease payments provide security to the investors in the bond. These types of bonds typically require the school district (and the public) to pay higher interest rates in order to get the $42 million.

If you are worried about this second type of bond, you can attend/watch tomorrow’s meeting at 2 PM. There will also be a public hearing, scheduled for some date, after tomorrow’s meeting. Finally, the public can contest these bonds. However, here is what we know as of now about the proposed issuance:

• The maximum amount of bonds issued is $42 million.
• They can be issued as a series of bonds (i.e. $10 million here, $20 million there).
• The maximum interest rate that can be paid is 5% per year.
• Bonds have to mature within 21 years.
• After fees and other expenses, we have to receive 98% of the value of the bond (i.e. We issue a bond for $42 million and we have to actually receive at least $41.16 million that we can use for building.

The questions I would ask, if I were on the School Board are: