PERRYTON ISD bond sale nets about $15 million; adviser says strategy cut two years from term, saved roughly $1.6 million

PERRYTON ISD trustees heard a post-sale presentation from a Live Oak bond adviser outlining results of the district's recent bond sale and the firm's strategy to avoid paying higher short-term rates during a period of an inverted yield curve.

The adviser, John, told trustees the sale took place Aug. 4. He said the bonds had a par amount "just over $14,000,000" and that the structure produced "just over $15,000,000" in proceeds; he said proceeds cover the district's project fund deposit and the costs of issuance. John gave the district a true interest cost (TIC) of 3.6858 percent on the 12 maturities sold.

John said the district's team used a two-part strategy begun in 2023: they sold enough principal to start the projects and lock the first-year tax rate, and deferred principal in the middle maturities (about years 2 through 13) to a later sale. "We sold an initial amount of bonds that got you guys started on your project, and those basically locked in the first year of principal and years 13 through the end," John said, describing the choice to leave certain maturities for the second sale to avoid paying inverted short-term rates.

Why it mattered: John said the approach took advantage of a normalization in the municipal yield curve since 2023. He told trustees the strategic structure shortened the bond term by two years compared with a more typical principal schedule and produced a stated reduction in the district's total payback of roughly $1.6 million versus the normal structure. John showed a comparison in which a "normal principal structure" would have produced a larger total payback (shown in the presentation as $66,940,000) versus the district's strategic structure (shown in the presentation as $65,365,000), and summarized the net effect to trustees as about $1,600,000 in savings and two years less on the bond term.

On investor demand and allocations, John said some maturities were oversubscribed while others had weak demand. He described the order period graphic, saying several short and mid maturities were oversubscribed (some by 2.0'2.5 times) and were allocated down slightly after pricing; other maturities received no outside orders and were taken down by the underwriter, Oppenheimer, which John said would resell those bonds on the secondary market. "In the areas where there's gray showing there, meaning there was not enough orders for that maturity, that's where our underwriter Oppenheimer and their liability to us as an underwriter comes into play," he said.

John also explained investor incentives for municipal bonds during the presentation. Answering a question from Bryce, a banker in the meeting, John said tax-exempt municipal rates can be attractive to institutional investors because they offer federal tax exemption; he illustrated equivalence by saying a roughly 3.85 percent tax-exempt municipal rate could correspond to about a 5 percent taxable yield when converted for taxable investors.

Other details John provided included: - The sale used 12 maturities and an allocation process that matched orders to available amounts in each maturity. - Between the premarket yields quoted Aug. 1 and final pricing on Aug. 4, John said the district's yields dropped by about 5'7 basis points in several maturities and about 7 basis points overall from the premarket level. - The presentation listed certain investor logos and named Oppenheimer as the underwriter that took down unsubscribed maturities. - John said the district will receive bond funds toward the end of the month, and that the district will make a small "token" payment (John cited $6,208 in the slide deck as the comparable token amount) that he described as necessary to secure homestead-exemption hold-harmless funding from the state.

No formal board action or vote on the bond sale occurred during the open-session presentation. Following the presentation, trustees thanked John and said they would continue working with Live Oak. The board then announced it would convene in closed session under Texas Government Code A7A7551.071 and 551.074 for attorney consultation and personnel matters.

Trustees asked no formal follow-up questions that changed the structure John described; John encouraged Greg, the district superintendent, to contact him or Live Oak staff if anything else was needed before bond delivery.