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PMA Financial outlines life-safety bond options and timing; board weighs phased issuance
Summary
PMA Financial briefed the Lockport board on municipal bond mechanics, recent legislative changes (30-year maturities and life-safety bond flexibility), the district's Debt Service Extension Base ($2.6 million), and the timeline to issue bonds that would affect the 2024 levy; PMA illustrated a 25-year scenario that would raise the median homeowner's levy by about $35 in the first year.
PMA Financial presented options for life-safety financing and municipal bond issuance to the Lockport Township High School District 205 board, walking the board through legal tests, timing, and likely tax impacts.
Jen, a PMA Financial representative, explained the District's Debt Service Extension Base (DCEB) and recent legislative changes affecting school bond practice, including that voter-approved referendum bonds no longer count toward a school's statutory debt limit and that capital bonds can now be issued with up to 30-year terms. PMA also said that life-safety bonds for tax-capped districts are no longer restricted to the DCEB, giving districts more flexibility in structuring debt payments. (Jen, SEG 1539-1560)
PMA noted the district's DCEB is about $2,600,000 for 2024, explained compliance tests for tax-exempt issuance (expenditure/time/due-diligence) and described arbitrage issues and exceptions (for example, the small-issuer $15 million exception and 24-month construction safe harbor). The firm emphasized the Feb. 28 deadline to issue bonds that would affect the upcoming levy and recommended parameter resolutions and sale-authorization steps if the board sought to act on the current levy cycle.
Using an illustrative 25-year structure, PMA presented sample debt-service profiles that would front-load higher payments in the initial five years and then allow a drop-off; the firm estimated an increase of about $35 to the median homeowner in the first year under that scenario. PMA and board members discussed the pros and cons of issuing bonds in multiple small tranches versus a single larger sale, including cost-of-issuance tradeoffs and market-timing risks.
Board members asked whether multiple tranches would affect credit ratings; PMA said the district's rating was unlikely to be affected by a $26 million program but noted increased issuance costs for more phases. PMA recommended coordinating issuance timing with construction draw schedules to meet IRS time tests and take advantage of favorable market windows.
No bond sale was authorized at the meeting; the board discussed next steps (parameters resolution, hearing schedule) and directed staff to return with any proposals and cost estimates before making binding decisions.
