Financial Adviser to Park City School District Breaks Down Master Plan Financing Options
Two financing options were presented to the Park City Board of Education at its April 20 meeting to pay for the cost of implementing the $154 million master plan.
The school district has hired Stifel, an investment banking firm, to advise on the financial aspect of the plan. Stifel representative Matt Dugdale presented the board with details on cost options should the school board go with a general obligation bond or a lease revenue bond.
In the master plan, Park City High School would expand to include 9th grade. Ecker Hill would bring in 8th grade to make a 6th through 8th-grade middle school. Each elementary school to expand to include district-wide universal Pre-K.
Dugdale said school districts in Utah have only two options to finance capital projects. He said investors tend to like the voter-approved general obligation bonds because the interest rates are low.
"Lease revenue bonds are a little different,” he said at the meeting. “They are a statutorily allowed vehicle for school districts. Not only do school districts use lease revenue bonds, but cities and counties also use them. But basically, the district creates a separate corporate entity which is the local building authority. And the only purpose of that local building authority is to actually finance projects. So essentially, it's a legal structure where the district holds title to the property, but the local building authority issues the bonds and then leases the facilities to the district. And those lease payments from the district go to pay the bond."
Lease revenue bonds do not require voter approval. Dugdale said current interest rates on lease revenue bonds are at about 1.7%. Voter-approved general obligation bonds are currently 1.55%. The school district would lock in interest rates for the bond duration, typically for 15 to 20 years.
Park City School District Business Administrator Todd Hauber said the school board has until mid-August to decide to put a general obligation bond voter referendum on November's ballot.
"I don't know if there is a leaning one way or another,” Hauber said. “What we're looking at right now is the project schedule itself. If the project schedule lends itself to working with the November election in order to generate funds for a GO bond, that's probably the route it would go. But if that doesn't line up very well, then the lease revenue bond is more flexible in that it doesn't have that fixed date, and we can adjust accordingly."
Hauber told KPCW that the school board's concern is implementing the master plan rather than waiting for voter approval in November.
“I think really it comes down to the timing of the funds and being able to finance the projects on the timeline that we'd like to see to start in this upcoming spring,” he said. “So really it is a timing issue, and we would like to be able to get the projects moving in the appropriate time frame."
Hauber said the master planning projects for the high school and middle school are not related to student enrollment growth, but that expanding the elementary schools to provide universal Pre-K is a response to community need.
"So, even with declining enrollment, we still have a grade to bring into the high school, and the same is with Ecker [Hill] and bringing that eighth-grade group or that class into the middle school facility,” he said. “So those are known quantities."
The district may choose to undertake the projects in phases, which would mean different tax burdens. The type of bond – general obligation or lease revenue – would also dictate the interest rate.