Letcher County finance corporation approves $1.42 million bond issue to fund two roof projects

The Letcher County School District Finance Corporation on April 27 approved a resolution authorizing up to $1,420,000 in school building revenue bonds to pay for two district roof projects.

Lincoln, an advisor with RSA Advisors, told the board at its meeting in the Bridal Smith Conference Room that "the total amount of bonds necessary to cover all the costs associated with those two projects is $1,420,000." He said the district's available School Facilities Construction Commission (SFCC) aid would cover bond payments and that "you would not write a check at all from your local funds." The board recorded the motion to pass the resolution and voted by voice that the motion passed.

Why it matters: Lincoln explained that Kentucky school boards cannot, under their traditional authority, incur debt longer than a year, so many districts form finance corporations to issue longer-term bonds and lease completed facilities back to the school board. He said the SFCC, a state agency based in Frankfort that distributes aid from the General Assembly, currently has capacity to support roughly $1.7 million in bond payments for the district; the proposed $1.42 million issue would use most of that capacity and leave about $280,000 available for future projects.

Details and next steps: Lincoln estimated an interest rate in the range of about 4.2% to 4.5% for the bonds and said the bonds would likely be issued in approximately three to four weeks, with an additional roughly three weeks from sale to closing. He told members the important timing milestone is to have bond proceeds by June 30. He briefly described the routine finance-corporation structure: the corporation issues the bonds, executes a lease for the financed property, and the board of education operates the facility under that lease arrangement.

Legal references and record: During his presentation Lincoln read language referencing provisions of the Kentucky Revised Statutes applicable to school building revenue bonds. The motion to adopt the resolution was made and seconded and carried on a voice vote. Board members were told there will be additional documents and signature requests from bond attorneys before closing.

The finance corporation meeting adjourned after the vote. The board is expected to act on related BG-1 forms for the two roof projects at the district's main board meeting, as described by the advisor.