$2,500,000 Certificates of Participation, Series 2003
On November 7, 2000 Bay Village voters approved a $20,000,000 bond issue to build a new middle school for the district. In March, 2001 the district issued $20,000,000 in bonds to finance the project
During construction, various unforeseen costs were incurred pushing the total expected completion price to $22,500,000. As a result, the district found itself in the position where an additional borrowing was required.
Since voters only approved $20,000,000 for the construction of the middle school, officials had to seek other means to finance the addition funding needs. With the advice of Sudsina & Associates, the district decided to issue Certificates of Participation (COPs) in the amount of $2,500,000 to fill the funding gap. The repayment of this debt would come from district operating funds.
Thanks to the district’s outstanding underlying bond rating by Moody’s Investors Service of Aa2, the COPs were rated Aa3 since the operating revenue pledge is viewed as less certain than the unlimited tax pledge of a voted issue. Also, due to the relatively small size of the borrowing and the high-end credit rating, the financing team determined that bond insurance would not enhance the pricing so the COP’s were sold solely with the Aa3 rating.
Sudsina & Associates. LLC assisted in all aspects of the transaction. The COPs were underwritten by Fifth Third Securities, Inc. The Cleveland office of Squire, Sanders & Dempsey served as bond counsel.
$14,734,993 Refunding Bonds
The 2001, $20,000,000 new middle school bond issue was sold with a final maturity of December 1, 2025 and a first call date of 12/1/10.
Interest rates had been dropping steadily throughout 2005 and by the 4th quarter of that year rates had dropped to the point where it made sense to refund the original bond issue. Sudsina & Associates advised the district of the debt service savings that could be had, and was once again engaged to guide the district through the issuance process.
During the preparation process, Sudsina prepared district officials for a rating presentation to Moody’s Investors Service with the goal to maintain the district’s lofty Aa2 rating. By the first week of December, 2006 the team traveled to Moody’s Chicago office to make the presentation. The effort proved worthwhile as the district’s rating was confirmed at the Aa2 level.
Shortly after the rating trip the issue was ready to price and did so on 12/13/06. At that time, the Bond Buyer 20 Bond Index stood at a record low level of 4.03%. As a result, the refunding resulted in savings of nearly $900,000 over the remaining life, and more than $614,000 (4.11%) in present value terms.
The District took advantage of the historically low interest rates with the new bonds having an true interest cost (TIC) of 4.22%, whereas the original bonds carried a TIC of 4.95%
In addition to the services of Sudsina & Associates, the financing team included A.G. Edwards & Sons, Inc., as underwriter, with bond insurance provided by FSA, and, again, Squire, Sanders & Dempsey as bond counsel.