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School board approves parameters to sell up to $9.5M in promissory notes in 2025 and 2026
Summary
The Committee of the Whole approved two resolutions delegating final sign-off for the sale of general obligation promissory notes (each not to exceed $9,500,000) to capture favorable market conditions and a bank-qualified tax benefit that could lower interest costs; the board voted to proceed on both 2025 and 2026 issues.
The Sheboygan Area School District Committee of the Whole voted to approve two resolutions establishing parameters for the sale of general obligation promissory notes, each not to exceed $9,500,000, in transactions planned for December 2025 and early 2026.
Brian Brewer, a financial advisor with Baird, told the board the district previously locked in $93,000,000 at a 3.78% all-in rate and recommended selling two smaller issues to take advantage of market movement and a federal "bank-qualified" tax provision that applies when banks buy municipal debt under $10 million in a calendar year. Brewer said the split timing should allow the district to capture lower rates now and again next spring.
"You're gonna be approximately $16,000,000 better than what you thought you were gonna be, you know, levying and collecting over the next 21 years," Brewer said, summarizing the difference between current market rates and prior planning assumptions. He also noted the first interest payment on the new issue is scheduled to start March 1, 2025, and said the district expects the issues to be assigned at least a Moody's "A A 1" rating.
The resolutions delegate final pricing and closing authority to the district president and clerk so long as the sale meets or improves upon the parameters set by the board. The board moved and approved the resolution for the 2025 issue by voice vote and then approved the near-identical resolution for the 2026 issue.
Board members asked several technical questions during a presentation and Q&A about how state aid and future credit-rating changes could affect net levy impacts; Brewer said Moody's would issue ratings for both issues before the sales and that a downgrade would modestly increase interest costs but was not expected.
Because the transactions are structured to be bank-qualified and to close in different calendar years, Brewer said banks receive an additional tax benefit that historically translates into lower interest rates for the issuer. He estimated the combined approach (current locked issuance plus the proposed smaller issues) minimizes interest-rate risk and maximizes investment earnings on project funds while holding debt-service mill-rate pressures near the district's planning target.
The board approved both resolutions by voice vote during the meeting and thanked Brewer for his presentation. The district will proceed with marketing and finalizing the issues subject to the approved parameters.
