School board takes class on 'Bonds 101'

It’s been so long since CK Schools asked voters to pass a bond, officials presented a “Bonds 101” tutorial Wednesday evening.

The district needs to pay for many capital projects: replacing aging schools, remodeling “keepers,” updating aging infrastructure.

No decision has been made yet on whether or not the district will even float a bond. The last bond for $62.5 million was passed by voters in 1992, said Gary Powell, assistant superintendent for business and operations.

Here’s the syllabus for Bonds 101:

l Voter-approved bonds are repaid with additional property taxes. They require a 60 percent “super-majority” to pass. The debt capacity is 5 percent of the assessed value of the district.

l Non-voted bonds represent no additional revenue, are paid for from existing revenue, and the debt capacity is three-eighths of the assessed value of the district.

l CKSD’s assessed value of $3.6 billion allows a $121.9 million bond — though it’s unlikely CK officials will ask for this.

“Bonds are the primary method used by Washington school districts to finance the local share of capital projects,” Powell said. “Because cash is generated up front, payments can be spread over time, and districts have some control over taxpayer impacts.”

The district is looking at several possible sources of funding — federal heavy impact funds (reimbursement for military installations not required to pay taxes), state matching funds (disbursed with whatever bonds can be approved), and the voter-approved bonds themselves.

The district is using Seattle Northwest Securities Corp. to examine a possible bond sale. The firm’s Vice President Richard Ehlers spoke to the CKSD board at its regular meeting May 28.

“Our company is one of the leading public finance programs in the Northwest,” he said. “Seventy percent of school districts in the Northwest use our services.”

He explained that by going through a company such as Seattle Northwest, districts have access to international investment markets with lower interest rates. This saves the district and the public money in paying off the bonds.

Lower interest rates result in lower levy rates for bonds, and the nation’s interest rates are currently at a 30-year low.

A possible time frame may cover four months and include: selecting a financing team, select election date, determine issue amount, select repayment structure, and draft ballot title. The district has hypothesized a possible bond vote early next year or later this year.

Seattle Northwest conducted a study in which they found no correlation between how steep taxes are and whether or not a bond passes. They have, however, found some correlation between the financial stability of a district and whether or not a bond passes.

CKSD has one of the state’s highest financial ratings — “Aa1.” A rating this high guarantees the bond will be backed by the state.

Other things the CKSD board must consider include construction cash flows, other levies, assessed value growth of homes, and impact on taxpayers.

The board voted unanimously to investigate the issuance of a bond.

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