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Board reviews $80M bond authorization and hears warnings about arbitrage liability
Summary
Administrators introduced a resolution authorizing up to $80 million in general-obligation bonds as the first tranche of a referendum; financial advisor Jake Glover and counsel explained an accrued arbitrage liability tied to prior bonds and discussed timing, reimbursement language and construction-management procurement.
District staff and outside advisors presented the financing plan that would put the first tranche of referendum debt on a March sale calendar. Heather Tucker and bond counsel outlined an initial $80 million authorization intended to fund a subset of projects (new Dutch Fork Elementary, wings at Chapin and Lake Murray Elementary, and program moves into the Richland Education Center). The administration said it limited the first construction-management solicitation to those three projects rather than charging a fee on the full $240 million program.
Jake Glover of financial advisor PFM explained why the district has an accrued arbitrage liability tied to the 2022 GO bonds: the bonds’ arbitrage yield was about 2.18% and investment returns on unspent proceeds exceeded that yield, creating a rebate liability unless short-term rates fall below the arbitrage yield. Glover told trustees the liability is not due immediately in most cases and that rebate calculations are routine; he recommended setting aside funds and using reimbursement language so the district can spend fund balance now and repay from future bond proceeds when appropriate.
Board members asked whether issuing less in March would affect construction-management contracts; staff said the initial solicitation is scoped to specific projects and not a percentage of $80 million. Trustees also discussed callable vs. non-callable features and premium pricing; advisors noted non-callable 10-year bonds are priced to maturity so premium does not materially change arbitrage yield for those issues. The board took the resolution up for consideration as the first legal step toward the referendum process.
