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December I, 2015 (Work Session)
<br />Page 2597
<br />financing contracts for various public school projects. She advised the
<br />request is to approve a resolution relating to one or more installment
<br />financing contracts in an aggregate principal amount of up to $112,000,000.00
<br />and to call for a required public hearing on January 19, 2016.
<br />Board:
<br />Ms. Fearrington reviewed the following information provided to the
<br />We are scheduled to issue debt in March for the Mount Pleasant
<br />Middle School, Kannapolis Middle School, and Royal Oaks Elementary
<br />School projects.
<br />As part of the process we are requesting the Board at the Regular
<br />Meeting on December 14th, to approve a resolution relating to the
<br />Installment Contract Financings of various Public School Projects
<br />and call for a Public Hearing.
<br />The aggregate principal amount will be up to $112 million dollars.
<br />This is the maximum amount with the worst case scenario. We will
<br />only be borrowing the amount of the construction and site work
<br />contracts for each project.
<br />As part of our cash and debt objectives we strive to only borrow
<br />funds for the construction and site work. We strive to pay cash
<br />for land, engineering, architect and equipping of the schools.
<br />The current estimates for the construction and site work for the
<br />three schools are.
<br />Mt. Pleasant Middle School $33,820,000
<br />Royal Oaks Elementary School $23,308,000
<br />Kannapolis Middle School $38,300,000
<br />These three schools plus the LOBS issuance cost ($1,183,900) and
<br />an estimated escalation cost ($9,579,100) equal $106,191,000.
<br />Working with our - underwriter on the worst case scenario, if we
<br />issue the debt at a discount then the aggregate principal amount
<br />will be up to $112,000,000.
<br />When bonds (LOBS) are sold with a discount, the issuer receives a
<br />lower amount of proceeds than the principal it repays. So, if we
<br />need to net $106,191,000 and we have to sell at a discount, then
<br />we will need our aggregate principal amount to be $112,000,000.
<br />In exchange for receiving less proceeds, we will pay an interest
<br />cost on the bonds that is below the market rate for comparable
<br />maturities.
<br />On the other hand when bonds (LOBS) are sold at a premium, we will
<br />receive more proceeds than the principal amount. If this is the
<br />case then our aggregate principal amount will be less than our
<br />need of $106,191,000. However, we will pay a higher rate of
<br />interest.
<br />The bottom line is we will continue to work with our Underwriter
<br />and Bond Council and will only issue debt for the amount that is
<br />needed to cover the construction and site work and closing
<br />expenses.
<br />She also reviewed the following information relating to the cost
<br />of LOBS projects.
<br />Current
<br />Last Numbers Numbers Increase
<br />MPMS 30,728,000 33,820,000 3,092,000
<br />Royal C?ak9 16, 900, 000 23, 306, 000 4,408,000
<br />KMS 36,666,256 38,300,000 1,633,742
<br />86,294,258 95,428,000 9,133,742
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