Four months after Park City voters authorized the Board of Education to borrow $79 million for school building projects, the board at a special meeting Tuesday essentially authorized itself to borrow $42 million.
These lease revenue bonds differ from the general obligation bonds that were on November’s ballot in that they use the district’s buildings, rather than its ability to levy taxes, as collateral. Lease revenue bonds also come with a higher interest rate, officials said, and do not require voter approval.
District Business Administrator Todd Hauber said these bonds do not require a tax increase, a point echoed by the district’s bond counsel Randy Larsen.
“This bond would not entitle you to charge a higher property tax, as well,” Larsen told the board. "Just so you know — couldn't do it if you wanted to."
Hauber said the district can pay off the debt using its existing revenue, the vast majority of which comes from property taxes. He also said the lease revenue bonds offer flexibility for the district's future budgets because the district can use many different funding sources to make debt payments.
The resolution the board passed Tuesday enables the district to borrow up to $42 million dollars to be paid back over not more than 21 years. The interest rate won’t be set until the bonds are put out to auction.
A district financial advisor, Matthew Dugdale, told the board the Alpine School District put out a similarly sized set of lease revenue bonds that day that secured an interest rate just over 3%.
“Since the end of January, we're up close to almost a percentage higher in our kind of borrowing rates,” Dugdale said. “But still, as you look at maybe a 10-year horizon, we're not at 10-year highs. We're still at the middle of the pack when it comes to interest rates over a 10-year horizon.”
Hauber said Park City’s $79 million general obligation bonds secured a 2.3% interest rate at auction.
The district is planning to pay for about $7 million of the overall plan out of its reserve funds.
The board said it intends to hold a public hearing at the end of April before issuing the lease revenue bonds.
