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Bump in bond rating saves district interest

SOLON– When you’re borrowing millions of dollars, a single tenth of a percentage point on interest rates can make a big difference.
A bump in bond rating and a favorable market helped the Solon Community School District sell close to $10 million in general obligations bonds at an attractive 2.8412 percent interest rate to Raymond James & Associates Inc. at a Nov. 10 school board meeting.
The sale was authorized by district voters when they approved a $25.5 million school bond issue to build a new middle school and performing arts center in the Tuesday, Sept. 9, school election.
A second bond sale is anticipated in the spring of 2015.
The district received seven bids for the sale of $9.685 million in bonds.
“Very nice bidding results,” said Travis Squires, representative of Piper Jaffray, the school’s bonding counsel.
Squires said the school district’s bond rating had been increased from A1 to AA3, something which helped drive down costs and attract more bidders.
“It’s kind of a pat on the back for administration and board as well,” Squires said, “setting budgets that are maintainable and having some long-range foresight.”
Overall, Squires said, the district’s improved rating likely lowered interest rates by as much as one-tenth of a point.
Board members unanimously approved the resolution authorizing the sale of bonds to Raymond James with a winning bid of 2.8412 percent.
The second place bid came in at 2.913 percent, Squires said, almost $140,000 in net increase on interest compared to the winning bid.
“That becomes a taxpayer savings with lower interest costs,” Squires said.
Raymond James will be giving the district a premium as well, paying more than face value for the bonds ($9.995 million).
The cost of issuance ended up being about $54,000 less than anticipated, Squires added. The net interest cost of the 20-year bonds will be $3,490,373.74.
“Overall, very good results, aligning with expectations, very good market still today,” he concluded.
After the bond issue passed in September, the district’s architect and its construction manager for the project began the design phase, planning for a bid opening in the spring of 2015 for both the middle school and performing arts center.
Passage of the bond issue is bringing about the construction of a new middle school building, as well as an 810-seat performing arts center addition to the high school.
The most cost-effective timeline for the district is to build both facilities in the same constriction season.
The new middle school, to be located west of the high school across Racine Avenue, will initially host grades five through eight.
But the long term plan for the district is to utilize its future share of sales tax proceeds to remodel the existing middle school into an intermediate elementary for grades three through five, a move that will create additional capacity for Lakeview Elementary and the middle school (which will become a six through eight junior high).
According to Superintendent Sam Miller, staff from Struxture Architects have met with teachers impacted by the high school addition, which includes a new special education room, visual arts classes and the Center for the Arts, on three occasions.  
“Staff have signed off on those design areas,” Miller said in an email.
A third session between the architect and middle school staff was planned for Monday, Nov. 24.
“I have not seen the tweaks to the plan since staff feedback, but I believe the changes are very specific to their individual spaces,” Miller said.
The school board is scheduled to hold a work session on Dec. 16 to discuss the project and potential timelines.