9/12/2016 – GO Bonds

C. 3. Approval to Move Forward with the Voter Approved Issuance of Up to $140 million (par amount) of GO/E-SPLOST Backed Bonds
 9/12/2016 – Work/Business
Agenda Item – GO Bonds
Details
A referendum was held on May 24, 2016 wherein the voters of the DeKalb County School District approved the E-SPLOST V program. As part of this approval, the voters approved the issuance of up to $200 million in GO/Sales Tax backed debt, carrying specific principal amortization tranches over the five year life of the E-SPLOST V program. Operations/Facilities and IT have determined a need for up to $140 million of these bonds to be issued during the first quarter of 2017.
Financial Impact
It is estimated that to generate bond proceeds of up to $140 million will require annual debt service payments (principal + interest) averaging more than $30 million per year from E-SPLOST V, with the ending principal payment being made July 1, 2022.

Discussion
[00:04:11] 
Stan Jester (Board of Education)
Is the annual debt service $30 million per year for 5 years?
Michael Bell (Chief Financial Officer)
That is approximate. The highest annual debt service amount is about $35 million per year.
Jester
How much is principal and how much is interest? I want to know how much this is going to cost.
Bell
The total cost of the issuance under current market conditions is $148 million.
Jester
So roughly $8 million?
Bell
It depends on how the premium lays into this thing. These kinds of things are marketed with a premium on top of par. You’ll have a $10K bond that will be sold at 105% or 108%.
90% of these bonds are going to pension funds or insurance companies. There is a tax break that those institutions get when they buy these bonds at a premium. These are in high demand and a lot of people will want to get these bonds at more than 100 cents on the dollar. That is where the overall generation of a premium on the overall bond issuance is going to take place.
To produce $140 million, we will have to market $128 million. That would be a $12 million dollar premium that will come in with that. If we sell $140 million we’ll be way up in the 150s.
This is if the premium conditions persist. The short term market would have to take so many hits that the premium relationship would go away. We don’t see that happening. We feel confident that we will continue to have a premium come through with this bond issue.
[00:07:37]