Cary Dist. 26 bond sale on track
Cary Elementary School District 26 continues to iron out logistics to sell the $15 million in working cash bonds voters approved at the November election.
Although the volatile bond market saw an interest-rate increase, which will increase the district's borrowing costs, bond experts say the district is on track to completing the sale.
Eric Anderson, managing director of Chicago-based BMO Capital Markets, said the district would be prepared for a sale of a portion of bonds in December with the remainder issued in January. The hike in interest rates is due to an influx in the supply of bonds, and Anderson said the district could take advantage of interest rates that are expected to lower after the sale of almost $8 billion in bonds in December.
In addition, Anderson said the district could recoup some of the additional expenses related to the interest rate increase through the use of tax-exempt bonds. Chapman and Cutler, finance attorneys overseeing the sale of the bonds, have said all or a significant portion of the working cash bonds can be issued as tax-exempt, Anderson said. That would save the district about 1.2 percent. Anderson estimated about $12 million of the $15 million in working cash bonds would be tax exempt.
A factor that would affect the amount in tax-exempt bonds would be the cash reserves the district has. If it is deemed the district has excess reserves, the district would need to use the excess reserves to retire the tax-exempt bonds, Anderson said.
The district's finance committee will review the full set of rules for the bond issuance at its Dec. 6 meeting, before the board of education adopts the bond resolution in January.
The $15 million bond issuance was needed to prevent the district issuing a second year of tax anticipation warrants to solve its cash flow problems. A second year of tax anticipation warrants would have guaranteed a state take over of the district, leaving all decisions up to the state.
With the new source of income, the district reduced its proposed budget cuts from $6 million over the next four years to $4 million before 2015.