Janesville district details plan for two bond issuances, cites federal rules on tax-exempt investments

The Janesville School District outlined plans to issue two general obligation borrowings tied to the facilities referendum approved by voters in November 2024 and explained federal rules that limit how the district can invest any unspent proceeds.

The details were presented to the Finance, Buildings & Grounds Committee on Feb. 18 by Dan McCray and Tom Griggs, the district—s bond counsel. McCray said the board is expected to consider a parameters resolution next week that will give administration discretion over timing and price when the district sells the two bond issues.

"The board will be taking action next week on a parameters resolution," Dan McCray said, describing the resolution as providing administration "a little bit of latitude on the sale" so the district does not have to lock in a single daily market rate.

Griggs described how the borrowings are structured and why federal rules matter. He said the larger, multi-year construction program makes the district subject to tighter rules for investing bond proceeds until they are spent. "They're tax-exempt because the interest income that a holder . . . receives is exempt from federal income tax," Griggs said, adding that the Treasury and IRS closely regulate tax-exempt bonds.

Griggs told the committee the district is planning two borrowings: a roughly $12.5 million issue to refund a prior BAN and a larger borrowing of about $139.3 million tied to the referendum projects. He said the larger, multi-year nature of the work means the district will likely invest interim proceeds in state and local government securities developed for longer projects, which typically pay lower returns than other market investments.

Committee members asked whether investment income would be federally taxed; Griggs replied the district—s position as a tax-exempt issuer means the earnings on those investments would not be federally taxed. McCray and Griggs also discussed arbitrage rules that can require issuers to return excess investment earnings to the federal government if investments earn more than the interest rate on the bonds. Griggs said the special state and local government investment instruments the district expects to use generally allow the district to retain investment earnings up to certain limits.

McCray said the team has worked with underwriter Baird, disclosure counsel Quarles & Brady, director of finance Matt Sylvester Knutson and Griggs to ensure compliance, and that they are targeting a March sale date for the bonds. He emphasized the presentations were intended to give the board transparency and clarity about the structure and regulatory constraints.

The committee did not vote on the borrowings; McCray said the parameters resolution will be brought to the full board next week for action.