Wednesday, December 23, 2009
DALLAS -- The Dallas School Board authorized district personnel to begin negotiations on selling $8.6 million in bonds at a special board meeting Dec. 17.
The resolution authorized Superintendent Christy Perry, Business Manager Tami Montague or Board Chairman Mike Blanchard to negotiate sale terms of a Qualified School Construction Bond with private buyer Capital One.
Any agreement would have to be given final approval by the board. If not approved, the district still could pursue a public sale.
Capital One's offer to buy bonds with a supplemental interest rate of 0.9 percent was one of the three sale options discussed at the board's regular meeting on Dec. 14.
The district's bond counsel, Ann Sherman, an administrative partner with the Portland office of K&L Gates LLP, said there are a few more risks unique to selling federal stimulus-funded QSCBs over tax-exempt bonds.
She joined the board via conference call.
Sherman said because QSCBs use a tax credit rate instead of charging the seller interest, the firms buying them have to be confident they will have taxable income to apply the credit. Given that provision, fewer firms feel the bonds are a prudent investment, she said.
The other risk is the bonds could be converted to taxable interest bonds -- meaning the district would end up paying interest -- if the money were misused or if a change in law stripped the bond of its QSCB status.
That could happen if the district did not spend the money within three years or if proceeds were used on a building that was sold or used in a way that was somehow beneficial to a private entity before the bond was paid off.
Depending on the terms of the sale, penalty interest charges may cover the life of the bond or just from the date of conversion, Sherman said.
She added the risk that the district could be held financially responsible for if Congress changed the law governing QSCBs is minimal, but should be kept in mind during the bond selling process.
"It would be useful to have a projection of what that would mean to you financially as a district," Sherman said.
Two Oregon school districts -- Salem-Keizer and Hermiston -- have sold QSCBs, Sherman said.
Board members passed the resolution unanimously.