Wary investors save PW-S School District $12.9 million

Surge in bond market spurred by economic uncertainties cuts referendum financing costs by millions

Visitors strolled through Port Washington High School’s new commons during an open house in June. The high school project was approved by voters as part of a $49.4 million referedum, which will cost $12.9 million less than expected to finance because of low interest rates. Press file photo
By 
BILL SCHANEN IV
Ozaukee Press staff

A stock market on edge over trade tariffs and economic uncertainties at home and abroad have sent some investors scurrying for the shelter of the bond market, and it’s Port Washington-Saukville School District taxpayers who will benefit to the tune of nearly $13 million.

The School Board on Monday approved the sale of $7.4 million in bonds to Northland Securities Inc. at what experts called an astonishingly low interest rate of 2.33% in the district’s third and final borrowing to finance $49.4 million in school improvements approved by voters in a 2015 referendum.

The final interest rate, which includes fees and other costs, will be 2.41%, which is lower than rates on money the district borrowed in May 2015 and July 2017 and results in an average interest rate for referendum financing of 3.1%.

A referendum that was projected to cost $82.2 million in principal and interest will actually cost $69.3 million — $12.9 million less. The district will also be able to retire its referendum debt more than two years ahead of schedule, with a final payment due in 2039.

Brian Brewer, director of public finance for Baird, the district’s financial adviser, said the latest interest rate is one of the lowest he has seen in his career.

“Since January of this year the rates have ticked down, and over the last month they have dropped like a rock,” Brewer told school officials. “I view this as a confluence of lucky situations in the market.”

Brewer noted that the district’s three-phase borrowing plan protected it against interest rate hikes, as was the initial fear, while also allowing it to take advantage of rate decreases, which turned out to be the case.

“Now you’ll be able to tell your constituents that the actual financing cost is nearly $13 million under what we had estimated,” he said. 

In addition to a favorable bond market, the district’s AA rating from S&P Global Ratings has been key to securing low interest rates, Brewer said, noting that a remarkable five firms bid on latest bonds to be sold by the district.

In other words, the Port Washington-Saukville School District is the type of secure, stable municipality that investors spooked by a skittish stock market are interested in.

Key to the district’s rating is its fund balance, which at about $6.5 million is considerably higher than the minimum amount required by policy and has allowed the district to avoid short-term borrowing, Director of Business Services Jim Froemming said.

“Some people call our rates lucky, but you have to put yourself in the right place to be lucky,” he said.

Another important rating factor is the vitality of the communities within the school district, Froemming said. 

“We have new housing developments, thriving business parks and a lot of projects downtown,” he said. “Communities that don’t have growth and aren’t thriving and expanding aren’t looked upon as favorably.”

The district’s latest borrowing is just another in a series of well-timed events. Not only was the most expensive referendum in the district’s history approved at the beginning of a period of precipitous interest rate decreases, but it preceded a construction boom that sent the cost of labor and particularly materials soaring.

“As our bids were coming in, the construction industry started to get going, then it just exploded,” Supt. Michael Weber said. “We were able to place our orders for materials before that happened.

“Everything fell into place for us. It has been really remarkable.”

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Wisconsin’s largest paid circulation community weekly newspaper. Serving Port Washington, Saukville, Grafton, Fredonia, Belgium, as well as Ozaukee County government. Locally owned and printed in Port Washington, Wisconsin.

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