Blue Valley Board authorizes leases backing $23 million in recreation certificates of participation

The Blue Valley Board of Education on Jan. 13 approved lease agreements that allow the Blue Valley Recreation Commission to proceed with financing roughly $23 million in certificates of participation (COPs) to fund new sports fields and improvements to an activity center.

The board’s action authorized two supplemental lease-purchase agreements between the trustee bank and the Blue Valley Recreation Commission, a necessary step for the Recreation Commission to complete the COP sale. The motion passed 7-0.

Board members and staff used the public discussion preceding the vote to probe repayment sources, the mill-levy effects and the recreation commission’s credit profile. Shane DeWald, who presented for the Blue Valley Recreation Commission, said the proposed financing would split proceeds between a sports complex (about $9 million) and an activity center renovation (about $14 million). He said the financing proceeds are expected to be spent within a three-year period.

The Recreation Commission’s debt service would be repaid from amounts tied to the commission’s existing mill levy, DeWald said. He and other presenters characterized the current mill levy as 2.85 mills; commissioners said the financing would effectively level that levy and not require an immediate increase. District and bond advisers described the financing structure as a lease-backed security rather than a general-obligation bond and said the district itself would not be on the hook for repayment.

David Arterberry (finance advisor) clarified that the school board was approving the lease that underlies the securities and was not approving the certificates’ sale directly. Arterberry and other advisors said the COPs were expected to sell in March and that current indicative yields for a 20-year issue were near 4.3 percent. The projected annual debt service for the new COPs was stated in the meeting at about $1.7 million.

Board members asked how the COPs would affect the recreation commission’s finances and credit metrics. Presenters said the leases would be secured by the financed properties (the activity center and the sports complex) and that investors evaluate the obligor’s willingness and ability to pay, referencing the commission’s tax base and historical repayment. The presenters said the commission’s revenue is roughly $20 million per year from a mix of mill-levy proceeds and program fees and that the new COPs, together with existing Hilltop-related leases, would leave the commission’s debt-to-assessed-valuation ratio modest compared with the overall tax base.

Supporters said lease financing is the statutory vehicle available to recreation commissions in Kansas (they cannot issue general-obligation bonds) and that the COP approach allows the projects to be built now while smoothing mill-levy volatility. Opponents and questioners pressed on interest-rate risk, timing of the sale, and how future property-value changes could affect levy receipts used to make lease payments.

The board adopted the resolution approving two supplemental lease-purchase agreements by a 7-0 vote.

Votes and next steps: With board approval, the Recreation Commission planned the COP sale to take place at a scheduled trustee sale meeting on the commission’s timetable. The district emphasized that the board’s vote authorized the lease that will support the COP payments; the Recreation Commission — not the school district — is responsible for making lease payments under the agreements.

Key documents and where this fits: The Recreation Commission presented project images, a financing summary and a timeline showing that a 30-day protest period had concluded; the commission said it would return to the trustee for the actual sale authorization. The board’s approval enables the Commission to proceed to the sale phase.