DALLAS - Stephen H. McDonald & Associates Inc., a financial adviser to many Oklahoma public schools, has designed a financing mechanism school districts could use to obtain financing for construction projects that cost more than the district's statutory bonding capacity can handle.
Under the plan devised by the firm, a conduit issuer would sell lease revenue bonds on a district's behalf; the bonds would be repaid using the proceeds of a voter-approved general obligation issue.
In the first use of this mechanism for real property, Noble Public Schools in Noble, Okla., will use the mechanism to build a new junior high school and add classrooms at other its campuses. District voters in February approved a $13.9 million bond referendum for the projects; but, the district's GO bonding capacity is only about $3 million, and it cannot issue revenue bonds.
The Cleveland County Public Facilities Authority in Norman, Okla., would issue $9.5 million in revenue bonds, which officials said would have a maturity of about 15 years. The district will retire this debt through GO bonds.
The McDonald mechanism allows the district to build all the projects at today's costs while adhering to the state's school district bonding limit of roughly 10% of assessed valuation, according to Tom Reser, a vice president with the firm.
"This is the only way the district can build all these projects at once," he said.
However, Reser qualified his support of the new mechanism in saying he wouldn't suggest the financing method to just any client.
"This type of funding would only be recommended for basic educational needs such as classrooms and not for extracurricular-type facilities," Reser said. "You're talking about tying up your bonding capacity for, say, seven to 10 or 12 years. You have to make sure your needs will be met during that time."
The district on Tuesday sold its first installment of the GO bonds, $1.8 million worth, to Legacy Bank, of Hinton, Okla., but the debt was not rated by an agency, Reser said. He said the $9.5 million revenue bond issue, which would likely be sold in July, would be rated by at least one agency and probably be insured.
Other Oklahoma school districts have used similar financing methods to pay for portable buildings and equipment.
