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Finance committee recommends $30 million initial draw to fund middle school project
Summary
Board finance report recommended structuring the middle school financing with an initial $30 million draw to maximize capitalized interest and lock current interest rates; next funding rounds expected to use a mix of local reserves and possibly another smaller bond.
The Abington Heights School District finance committee on June 18 outlined a financing strategy for the district’s planned middle school project that begins with an initial $30 million borrowing, finance staff said. The committee — reporting to the board — recommended structuring the borrowing to capitalize interest and lock in current rates to limit market risk.
The finance update, read into the record by an absent committee member’s report and discussed by Superintendent Doctor Schaefer and finance staff, said the board previously approved up to $55 million in financing tied to middle school and high school facility work. The administration described the $30 million as the “first tranche” of an approximately $50 million project and said proceeds will be placed into a separate bond construction fund as required by the IRS and recommended by the board’s bond solicitor.
Finance staff said interest earned in that construction account must be tracked and used only for the project; rules exist to prevent positive arbitrage on borrowings over a threshold (staff said $15 million) and that excess investment earnings could need to be remitted to the IRS. The administration said future financing rounds are expected to rely on a mix of local funds from capital reserves and, if needed and favorable market conditions, an additional smaller bond issue.
During public comment, resident Mister Staller asked detailed questions about cash flows, whether interest income in construction or capital reserve funds can be reallocated, and whether the district would adopt the budget that night. Finance staff and board members responded: proceeds from bond borrowings are recorded in separate funds and interest earnings in those funds are restricted to the associated project; capital reserve transfers are generally one-way into specific funds and not fungible back to the general fund.
The finance committee report did not require a vote; the board used the update to confirm next steps and to await updated market-rate information from PNC and PFM, which the administration said will be circulated to the board as available.
