District 300 lucks out with timing of bond sale

The credit crisis that has stymied the ability of banks and businesses to conduct routine transactions is now affecting local schools and towns.

The market for municipal bonds, taxpayer-backed loans that are used to build schools and pave roads, has tightened.

But unintentional good timing allowed Community Unit District 300 to get funding for $45 million in renovations at the district's middle schools this year.

The district sold the bonds Sept. 8, just about two weeks before financing for large-scale public construction projects started to freeze.

District 300's bond counsel sold the bonds in September because the district needed the money - but didn't know it would have found a tight market for its bonds if it had waited just a few more days.

"We can't sell bonds right now in an effective manner," said Elizabeth Hennessy, the district's financial adviser. "I'd like to say we knew it was coming, but we were just very lucky."

District 300 Chief Financial Officer Cheryl Crates said the district would have been in a tough spot had been unable to get financing because it already had committed to paying contractors.

"We would have had to stop construction," Crates said.

Bond proceeds will pay for ongoing renovations to expand and modernize most of the middle schools across the district.

The timing of the bond sale had another bonus for the district: lower interest rates. Since the Sept. 8 sale, interest rates on municipal bonds have gone up by about half a percentage point, Hennessy said.

That may not sound like much, but it could save taxpayers several million dollars in interest payments over the life of the bonds.

"I suspect they would have paid a lot more stepping into the marketplace today than when they issued their bonds," Harris Bank bond consultant Eric Anderson said.

The district also saved an estimated $3.3 million by obtaining a higher credit rating, Hennessy said. The rating from Standard & Poor's improved in August on the strength of the district's fund balances and long-term planning.

"It is especially important now to have a good credit rating," Anderson said. "The higher your rating, the better your interest rate's going to be."

The improved rating may have helped the district get financing because few investors are buying bonds that carry a higher credit risk, municipal bond experts said.

"If there's a limited amount of capital available, it's only going to be the highest-rated borrowers that are going to get access to that capital," said Jim LeBuhn, senior director of public finance for Fitch Ratings, an agency that assesses credit risk.