CHICAGO — A little more than a year after a devastating tornado destroyed six of its facilities, Missouri’s Joplin School District moved its rebuilding effort into high gear Tuesday with its first issue under a voter-approved $62 bond authorization to help finance a $185 million capital program.
The district sold $35 million and will exhaust its bond authority with another issue next spring.
Along with about $89 million in insurance, $36 million in state and federal disaster and other aid, and at least $2 million in donations, bond proceeds will raise the funds needed to pay for its planned projects.
“It’s important we get these projects built on time and on budget,” said the district’s chief financial officer, Paul Barr. “We are grateful for the support of our community in approving the bonds, especially during such a trying time for many members of our community.”
The district — its formal name is the Jasper County R-VIII School District — lost six of its 19 buildings when the category F-5 tornado ripped through the southwestern Missouri city on May 22, 2011.
Total district damages topped $120 million. The school system provides K-12 education across a 70-mile area, serving 61,000 residents in the city of Joplin and several neighboring communities.
The immediate focus after the storm was on getting facilities open on time. The goal was accomplished by using an empty school, warehouse space and a shopping mall. The district reports that 92% of students returned, but about 4,000 of its 7,252 students started the 2011-12 school year last August in temporary sites.
Costs are also contributing to the sense of urgency, as temporary facilities carry a $40 million price tag over a three-year period, with the district responsible for about $6 million. The favorable interest-rate environment for tax-exempts is an added benefit for the district’s timing, Barr said.
Standard & Poor’s affirmed the district’s A-plus underlying rating ahead of the sale. The bonds carry a AA-plus rating due to state enhancement from the district’s participation in the Missouri Direct Deposit Program.
The finance team, led by George K. Baum & Co., tailored portions of the $35 million, 20-year bonds to retail buyers and launched a special marketing effort with a selling group made up of firms with strong retail networks with offices in Joplin.
The selling group includes Edward Jones, Stifel Nicolaus & Co. and Wells Fargo Securities.
“This was a very targeted, special selling group to satisfy local retail investor demand,” said Gregory Bricker, Baum’s lead banker on the transaction.
The bonds were structured in serial maturities with the longest maturity structured as a discount bond to maximize retail appeal. Bricker said the sale captured a true interest cost of 3.385%, with local retail buyers purchasing $1.5 million and the selling group taking down about $1 million of bonds for distribution throughout their regional network. Two of the three firms in the selling group, Edward Jones and Wells, placed orders.
“We were very pleased,” Bricker said.
In its last bond issue in 2007, the district also launched a strong local retail-marketing effort with about $2 million of the $57 million issue going to retail buyers.
The tornado killed 161 and left 1,000 injured. In addition to the district’s damage, more than 8,000 homes and businesses were destroyed, along with St. John’s Regional Medical center. It was one of the deadliest tornados on record.
As the district crafted its rebuilding program, Operation Rising Eagle, it also decided to undertake other building projects on the drawing board that were unrelated to the damage. The expenses are not covered by state, federal or insurance funds.
The $185 million building program includes 77 individual projects, including a new $104 million high school and Franklin Technology Center with a community safe room. The high school was destroyed by the storm. Insurance will cover half of the school’s cost, with federal and state funding providing an estimated $10.5 million and the district picking up $38.7 million.
A new middle school carries a $27 million price tag while two new elementary schools cost $32 million. Another $15 million will cover the construction of safe rooms at district buildings and $7 million will go towards elementary repairs and improvements.
The borrowing this week will help finance the new middle school and one elementary school with work slated to begin this summer. Both schools are expected to open their doors in December 2013.
Construction on the high school will begin this fall with a scheduled completion date in August 2014. “We are taking a staggered approach on the bond authorization because of the timing of the projects,” Barr said.
Despite the strain of paying for cleanup and temporary sites, the district held on to its underlying issuer rating from S&P on $68 million of debt. The district had healthy ending balance levels at the time of the tornado and was able to tap them to manage cash flow as it awaits aid and insurance reimbursement.
“We are fine on liquidity but our fund balances will be down this year as we wait for reimbursements,” Barr said. The district used about $8 million of reserves in fiscal 2012, which closed June 30, leaving about $7.5 million in its fund balances, or about 12% of expenditures.
“The district’s historically strong reserves are being challenged as it faces reconstruction costs in conjunction with uncertain property tax collections and enrollment-based state aid revenue,” analysts said. “Given the cash balances the district had accumulated, which we considered strong, we understand the district has not had, and does not project, any cash-flow problems.”
The rating is supported by the diverse local economy that serves a regional retail and service center, strong wealth levels, historically strong general fund reserves, and a low to moderate debt level.
“Financial and economic challenges and uncertainty stemming from a devastating tornado that struck Joplin … are, in our view, limiting credit considerations,” analysts wrote.
The district’s most recent assessed value totaled about $842 million, down an annual average of 2.5% from the $890 million recorded in 2010. Preliminary estimates from Jasper County report that the district’s AV may decline by an additional 5% to roughly $800 million in 2013.
While the district will face a drop in assessed value over the next couple of years, there is a rebuilding boom across the city and Jaspar County that is expected to return and eventually bolster market values, officials said.
