Mahtomedi board approves parameters resolution for roughly $22.36 million bond refunding

The Mahtomedi Public School District board on Monday, Jan. 6, 2025, approved a parameters resolution stating the board's intent to issue general obligation school building refunding bonds, Series 2025A, in an aggregate principal amount of approximately $22,360,000 and set parameters for sale and execution.

The district's financial adviser (Tim) told trustees that market rates have shifted since the district's earlier planning and that the parameters resolution increases the true interest cost (TIC) parameter to 3.7% from the prior 3.15% so the district will not need to reconvene the board if market bids fall modestly above the earlier threshold. "Rates have changed. Unfortunately, they've popped up a little bit," Tim said, adding that the district planned an estimated sale date of Jan. 22, 2025, and would use Dorsey & Whitney as disclosure counsel.

Tim and other presenters said staff and advisers are monitoring comparable municipal sales handled by Ehlers and expect the results to be close to the board's parameters; one comparable (Cloquet School District) showed a TIC of about 3.23% in recent sales. Trustees discussed mechanics of the sale: bids will be taken on the estimated sale date, the district will evaluate results against the approved parameters, and if results fall within the parameters designated by the board, designated officials will execute the sale on the board's behalf. If market conditions produce bids outside the approved parameters, the district will not accept the bids.

Projected savings and cashflow treatment: Advisers estimated savings from the refunding in the comparison range discussed at the meeting (a spreadsheet of comparables was provided); trustees were told earlier estimates indicated roughly $1.4 million in savings under favorable comparables. During the short reinvestment window (about 35 days between the new issue closing and redemption of the refunded bonds), staff plan to invest proceeds in state and local government securities yielding about 4.14% to 4.4%, which advisers estimated could generate roughly $93,000 to help offset issuance costs.

Call features and term structure: Trustees asked whether the refunding bonds would include call provisions. Advisers said the proposed restructuring pushes payments to Feb. 1, 2032 (documented schedule), and they do not expect a short call feature; including an early-call feature would likely raise the interest rates bidders propose. The sale will include customary disclosures and a disclosure counsel opinion from Dorsey & Whitney.

Board action: A motion to approve the parameters resolution authorizing staff to proceed with the refunding sale under the specified thresholds (Series 2025A, approx. $22,360,000 principal; TIC parameter 3.7%; estimated sale date Jan. 22, 2025) was made and seconded. The motion carried on a voice vote with no oppositions recorded.

Next steps: Staff and the district's financial adviser will take bids on the estimated sale date, evaluate the results against the board's parameters and return to the board at the next meeting to confirm and approve the final sale if results are within the parameters. If market conditions deteriorate before the sale date, staff advised the board the district could decline to accept bids and not proceed.