SD2 gets deal on bond sale, taxpayers to save millions

2014-01-15T10:50:00Z 2014-01-16T08:15:04Z SD2 gets deal on bond sale, taxpayers to save millionsBy ROB ROGERS rrogers@billingsgazette.com The Billings Gazette

Taxpayers in School District 2 will pay less for the $122 million bond approved in November after the first series of bonds sold Tuesday with a lower interest rate than expected.

When planning the bond and promoting it to voters, SD2 officials estimated bonds would sell at a 4.56 percent interest rate and a homeowner with a $200,000 house would pay about $10.95 a month in additional property tax.

However, the bonds the sold Tuesday with an interest rate of 3.55 percent, meaning the owner of a $200,000 home will be paying roughly $6.45 a month in additional property tax.

Overall, that difference in interest rates will knock about $22 million off the total price of the bond, said Leo Hudetz, SD2’s chief financial officer.

“It’s pretty significant savings,” he said.

The district first started to get indications in December that interest rates could come in lower than officials had planned. But at the time, they were looking at a potential drop from 4.56 percent to a flat 4 percent.

No one anticipated it to come in at 3.5 percent.

“It’s awesome,” Hudetz said.

The district sold $80.9 million of the $122.3 million Tuesday. The remaining $41 million will be sold off in the next two years.

The $80.9 million will be used on deferred maintenance projects that will begin next summer, including extensive work to update and expand Broadwater and McKinley schools downtown. The rest will be used to design and build two new middle schools in the Heights and on the West End.

SD2’s planning committee last week recommended to the board that the Heights middle school be built first and that it start the West End school the next year. The board will make its decision Monday night.

Sites for the new middle schools were secured last fall. The Heights middle school will be built at Bench and Barrett roads next to Bitterroot Elementary School. The West End middle school will go up at 56th Street West and Grand Avenue.

Given the size of the bond — $122.3 million — the district’s financial adviser, D.A. Davidson & Co., recommended early in the planning process that the district seek ratings from two credit-rating agencies, Standard & Poor’s and Moody’s.

Officials learned in December that the district had been given a rating of Aa3 by Moody’s and AA- by Standard & Poor’s, both considered high marks by the industry.

Those favorable ratings helped SD2 secure a better interest rate, Hudetz said. But also playing a role, he said, was the nation’s latest jobs report, which came in lower than economists had expected. Those numbers adversely affected the market but improved conditions for SD2 to get a lower interest rate.

Hudetz also said the amount individual property owners pay in the bond tax will go down as more people move to Billings and the tax base expands.

The bond, approved by voters on Nov. 5, was the biggest to pass in Yellowstone County history, winning 54 percent of the vote.

Copyright 2014 The Billings Gazette. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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