AASD borrows more for $88M project
Board chooses to issue second set of construction bonds, keep cash
Five and a half months into construction of a new high school, the Altoona Area School Board voted 5-4 Monday to issue a second set of construction bonds to finance the total cost of the $88 million project.
Issuing bonds for the total cost of the project is a switch from last May when the board planned to reduce the total interest paid on the project by paying $25 million in cash.
Board President Dutch Brennan, Vice President Wayne Hippo, Bill Ceglar, Rick Hoover and Kelly Irwin Adams approved a resolution to issue the full cost of the project, while Ron Johnston, Sharon Bream, Ed Kreuz and Dave Francis voted against it.
Kreuz and Bream were especially dissatisfied with the total debt the board would incur through borrowing the full cost.
However, the board’s bond counsel, John McShane of Boenning & Scattergood, said market conditions are favorable for the board to keep the $25 million in-hand because it would generate interest revenue.
“Interest rates are to your advantage. And the more reserves you keep, the higher bond rating you can have. Your bond rating will move up one category by holding onto the reserves,” he said.
Instead of paying the money up front, that money, as well as the proceeds accrued from investing it, can then be used to pay debt for the project or be used for general budgetary deficits projected for future years, he said.
Despite voting against the resolution to borrow the remainder of the cost, Francis said he agreed that keeping the money would benefit the district because annual budgetary projections show deficits, and that cash may need to be used to balance budgets.
The resolution the board passed Monday allows the board to issue bonds not to exceed $55 million, but McShane said the actual amount issued would be about $48 million.
The school board’s first construction bond issue was for $35 million.
“Last year, you issued $35 million and actually brought in $38 million in proceeds. There is $48 million needed for the remainder of project,” McShane said.
The board last year issued $35 million in tax-exempt municipal bonds for the initial phase of the construction project; that bond issue was reinvested at an amount far greater than the bond’s face value, McShane said.
The sale of those bonds resulted in $3 million more for a total of $38 million in proceeds to be used for the project because investors bought the bonds at a higher interest rate than the district issued them, McShane said. The district will keep the extra $3 million and pay back the $35 million with interest.
The debt schedule for paying back the debt would take 30 years starting in 2023, after the new high school is occupied, McShane said.
The district’s total debt service would be $222 million paid by the end of the 30-year term in 2050. That figure includes both bond issues for the new high school, as well as existing debt from the junior high school project and elementary schools.
But with PlanCon funding or state aid for construction projects factored in for all projects and the $25 million the district will keep available to pay debt service, McShane said the district’s true debt is closer to $140 million.
Joe Metzgar was the lone taxpayer to address the board during the public meeting in the William P. Kimmel Board Room on Monday.
“People are concerned with money flying out of this building,” he said. “You are going to raise taxes.”
He reminded the board that once the high school building is complete, there are elementary school buildings in need of repairs or renovation to the tune of millions more.
Mirror Staff Writer Rus O’Reilly is at 946-7435.