The Sherman Independent School District’s board of trustees approved the issuance of building bonds during a special meeting Friday morning.
The building bonds are responsible for financing the projects within the voter approved bond package for the district. After the $308 million bond failed in the spring election, voters approved a new $176 million bond package for Sherman ISD during November’s election.
Sherman ISD’s financial advisor Joshua McLaughlin, with BOK Financial Securities, explained favorable bond sale conditions and lower than expected interest rates are likely to provide major savings to taxpayers.
“It’s been very volatile since the 2016 election,” McLaughlin said. “You are below the historical index since 2000 by almost one full percentage point. Historically, it is a great time to be looking at selling bonds. Based upon this index, interest rates have only been lower around five percent of the time over the last 20 years.”
In addition to favorable market conditions, interest rates are determined, in part, by the district’s history of debt management. McLaughlin said the district has used strategies like refinancing previous bonds, prepaying bonds and using variable rate bonds to manage its overall debt portfolio for more than a decade.
“Since 2006, the combination of those debt management strategies has produced a savings of $37.6 million dollars,” McLaughlin said. “Your existing bonds are fully repayed over the next 15 years. You have roughly $63.7 million in bonds outstanding.”
Voters approved a 21-cent tax rate increase to fund the bond projects. For those with a home valued at $100,000 this comes out to approximately an additional $17.50 per month. Tax rate increases were considered between 20 cents and 23 cents. The board settled at the 21 cent increase and said it would cover immediate concerns and allow some work to begin for the future.
McLaughlin predicts the $136 million fixed rate bond sale will procure an interest rate of 3.69 percent rather than the 4.5 percent interest rate that was communicated to voters prior to the election. He went on to explain variable rate bonds will be used to help lower borrowing cost as well.
In addition to the new high school being constructed, the bond package will convert the old high school into a middle school. Piner Middle School and the new middle school will then each have room for sixth to eighth graders, thus allowing students to remain on one campus for a longer period of time than is currently possible.
McLaughlin said all actions are expected to be complete by the end of January, as would be necessary to move forward with the sale of the bonds. The next step would be to price the fixed rate bonds at the beginning of February and the variable rate bonds 15 days later. The first set of money would be received March 1 and by March 22, the district would receive the $176 million in its entirety.