The finance adviser for local schools beamed last week in describing a 10-year repayment plan for $10 million borrowed at half-percent interest, but this is mostly an academic exercise.
LJ Hart & Co., led by CEO Larry Hart of St. Louis, together with senior financial analyst Erin McManus, gave an update to the St. Joseph Board of Education as to how his firm is leveraging federal Elementary and Secondary School Emergency Relief funds. Country Club Bank of Kansas City, Missouri, shall enable that in buying eight figures of school district debt at a rate of 0.35% to 0.65%.
“It reflects your A+ rating … We feel really positive about those rates,” Hart said.
The second tranche of ESSER dollars is finally coming down the pike after then-President Donald Trump signed the U.S. Consolidated Appropriations Act in December 2020. In this system, agencies are charged to figure out their capacity to invest in services or infrastructure that are related to damage caused by COVID-19 or will help deal with the pandemic going forward. They then apply to be made whole with federal dollars funneled by the state’s school authority, the Missouri Department of Elementary and Secondary Education. Reimbursement is all but guaranteed.
“This is wonderful: Your bond yield for arbitrage purposes, which is effectively what you’re borrowing at, is 0.48%,” McManus told the board. “This has a two-year call feature, which means in April 2023 you’re able to pay off these certificates at no penalty, assuming you’ve been reimbursed all of those ESSER funds from DESE.”
The work to be funded is akin to climate control upgrades that had been part of the Proposition CARE April 6 bond issue and tax increase that voters rejected by a nearly 65% margin. In light of this, the district has sought to do as many upgrades as it can without raising taxes. It will upgrade HVAC systems in all three high schools as well as at Hillyard Technical Center.
According to McManus, Country Club Bank will distribute the money to the district’s construction fund beginning on Wednesday, July 7. In a news release, the district said it anticipates funding HVAC work with $9.6 million upfront. Doug Van Zyl, superintendent of schools, cheered the development.
“The reoffered yields obtained as a result of the current market are going to be highly beneficial for the long-range plans of the district,” he said in the news release. “It appears from these reoffered yields accompanying the low interest rates that our good name with the Missouri municipal bond market proved to be helpful …”