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$31M plan for school bonds gets board OK

Funding backed for construction by Thomas Saccente | April 20, 2020 at 2:44 a.m.

FORT SMITH -- The Fort Smith School Board unanimously approved a resolution last week to proceed with issuing $31 million in construction bonds.

In June 2018, the board reviewed a timeline to issue bonds supported by an election that year, said Fort Smith School District Chief Financial Officer Charles Warren.

In May 2018, residents of Fort Smith and Barling approved a millage increase to fund multiple projects in the Fort Smith School District. The increase, which moved the school district property tax rate by 5.558 mills from 36.5 to 42.058, will generate about $120 million, according to a previous Arkansas-Democrat-Gazette article. It was the first millage increase in Fort Smith since 1987.

Warren said that that timeline included the flexibility to delay the $31 million bond issue as needed, with the district now ready to move forward with it.

"It also is coinciding with some, what we hope to see, favorable rates regarding the current market," Warren said. "While we're seeing a lot of lower interest rates on the short-term market based upon what the Fed is doing, we're hoping that that will also impact the long-term rates of which our bond issue is relying on."

An abstract regarding the resolution that was included in the agenda packet states that the Federal Reserve cut its benchmark interest rate to 0% on March 15. The district's financial adviser, Stephens Inc., prepared a schedule of events for the bond issue, with June 9 being the targeted closing date. The district's goal is to select a closing date that provides the lowest available interest rate.

School board member Dalton Person asked Warren about the approximate savings estimated by issuing the bonds in this environment as opposed to the trajectory the district was on one or two months ago. Warren said it is difficult to tell with this difference in timing because the district is still "projecting out a couple of months."

"However, when we're providing an estimate right now, we're looking at a debt service payment that we're conservatively working with Stephens to project, and we're hoping to see an annual savings in debt service of $200,000 every year below our projected millage campaign," Warren said. "So we're hoping to be able to achieve that, and if we're successful, it may even be lower than that."

Warren also confirmed that the school district has the right to decline to accept any of the bids.

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