Council Rock finance committee reviews multi‑phase $81M borrowing plan; board asked to consider parameters resolution

Zach, a managing director with PFM, told the Council Rock School District finance committee on Jan. 15 that the district faces a multi‑phase borrowing program to fund Holland Middle School, Newtown Elementary and the Chancellor Center and that the plan includes two scenarios — one without a stadium and one that adds a roughly $7.6 million stadium project.

PFM framed the presentation with current market context and a 10‑year tax‑exempt interest‑rate index, noting recent declines and a long‑term position roughly at a 20‑year average. "Rates have been coming down recently," Zach said, but he cautioned that the board should not rely on perfect timing.

Why it matters: the proposed program would be issued in multiple series to manage budget impact. PFM recommended an initial, bank‑qualified borrowing of just under $10 million in 2026 to fund early planning and design; that issue would qualify for more favorable terms and a five‑year call feature. The plan then shows a large construction borrowing (~$42 million) in 2027 and a cleanup issue in 2029 to right‑size final needs. PFM estimated roughly $81 million in total borrowing to complete the three core projects under scenario 1.

PFM highlighted two legal and structural constraints. First, federal tax rules include an "expenditure test" that generally expects about 85% of borrowed proceeds to be expended within three years; Zach said the district should maintain draw schedules and documentation to meet that test. Second, PFM explained how bank‑qualified status (borrowings of $10 million or less per calendar year) can lower rates and shorten call features, and the firm described state rules that require level or declining net debt service when structuring wrap‑around issues.

Board members pressed PFM on the choice of a wrap‑around debt structure vs. a level repayment plan. Trustee Joe Hidalgo said he preferred less back‑ended borrowing and asked for a comparison showing the additional lifetime interest under the wrap. "I'd rather not wrap around if we could and be honest, save money down the road," Hidalgo said, asking PFM to return the extra interest cost for the wrap option. Zach agreed to provide scenarios and the requested numbers.

On capacity, PFM showed that adding the stadium in scenario 2 reduces the district's annual capacity in the near term — producing a projected negative capacity year in 2028 that would be covered by the district's debt‑service reserve. Tony Rapp, director of business administration, told the committee the debt‑service fund balance is approximately $4,000,000 and can be used to smooth a near‑term shortfall.

Next steps and board direction: PFM recommended passing a parameters resolution (a board authorization that sets a borrowing ceiling so the financing team can move when market conditions are acceptable) at a future meeting so bond counsel and the financing team can finish documentation and obtain a credit rating. PFM suggested Feb. 19 as the first feasible meeting to pass that resolution, with pricing late March and settlement and funds available in late April if the board proceeds on the proposed timeline. Several trustees asked staff to return with refined scenarios showing:

- the interest‑cost comparison between wrap‑around and level repayment structures; - an updated draw schedule and revised borrowing amounts as design and cost estimates change; - the specific parameters and draft resolutions for board consideration (parameters resolution and reimbursement resolution).

No formal motion or vote on the debt parameters took place during the Jan. 15 meeting; the committee directed staff and PFM to prepare the materials for a future meeting so trustees can consider a parameters resolution and reimbursement resolution.

Ending: The committee closed the PFM presentation after an extended Q&A; PFM staff said the plan and timing are flexible and will be adjusted as rates and draw schedules evolve.