Hello, my name is Sandi McMillan and I’ve spent the last year and a half serving on the Ferndale Citizen Bond Oversight Committee (BOC) with six other school district tax paying citizens. The BOC’s primary functions are to make sure the projects from the 2018 Bond get completed on time, on budget, and in a way that aligns with the expectation of the voters who approved the measure. I am writing today about a very important and often overlooked component of a large bond project, the sale and financing of the bonds themselves.
During our first year, the BOC and the School District worked on the development of a Debt Policy that will govern future bond issues. When this policy is eventually finalized, it will provide an additional opportunity for citizens to engage with the School Board in order to share their thoughts and concerns about incurring future capital projects debt and keeping property taxes low.
The current bond project will be funded through three negotiated bond sales totaling $112 million that you, the voters, authorized. It is important to realize that just like on your home mortgage, the interest on top of the principal amount, adds up to be a very large number. On our $112 million bond it is estimated to be in the neighborhood of $50 million. This is an amount that makes it well worth discussing and working to keep as low as possible, just like any other part of this project.
So far, two of the three bond sales have occurred. The first sale in 2019 had a total interest cost of 2.8% and the most recent 2020 sale had a total interest cost of 1.6%. Those are very low, in part, because the District earned one of the highest bond credit ratings due to clean audits and good fiscal management as cited by the rating agency. This is something to be acknowledged, as it positively affects us the taxpayer by minimizing the amount of interest paid. The third and final bond sale will be in 2021 and it can be assumed the final bond sale will have a similar low total interest rate as the first two sales. Building on that thought, it is highly conceivable that the property tax rate associated with this bond will be lower than originally estimated!
The BOC worked hard in encouraging the District to pursue a best practice in hiring a municipal financial advisor to independently review the negotiated pricing of the second bond sale. The District spent the time to hire NW Municipal Advisors and they determined this sale of bonds was well priced and the costs associate with the bond sale was fair given market conditions. Third party pricing consultants have been used often in this construction project and the BOC was happy to see the District implement this best practice to assure the financing brought Ferndale citizens the best interest rate!
Your Ferndale Citizen Bond Oversight Committee has spent hundreds of hours analyzing, commenting, and debating every aspect of this project so far. As we continue to move towards the beginning of construction of Ferndale’s new high school, we would like to invite you to participate in this generational milestone of our community by watching our monthly meetings on Zoom. If you can’t join us live you can always read our meeting minutes and see other bond related updates on our webpage, https://www.ferndalesd.org/community-oversight-committee.
Please join us in building a better Ferndale community and a brighter future for our students!
Bond Oversight Committee
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