Jubilation filled the meeting room of the Sunnyside School Board during a special gathering of directors last night to approve the sale of $11 million in bonds to construct a new school.
Sunnyside School District patrons approved an $11 million bond issue to construct the new school in the area of Washout and Sheller roads during a Feb. 3 election. At the same time, district voters also approved a four-year $1.4 million levy.
But last night's meeting had nothing to do with the levy, but rather with some good news that residents of the Sunnyside School District should be more than happy to hear.
When the matter was originally put before voters, school district officials expected patrons to be paying $1.61 per $1,000 of assessed property value to cover the cost of the bond issue. Jon Gores of Seattle-Northwest Securities Corporation, which handled the bond transaction for the school district on Wednesday, reported last night to an elated board that district residents will only be paying $1.51 per $1,000 of assessed property value, or 10¢ less than originally estimated.
Gores sold all $11 million in bonds for the school district yesterday (Wednesday) morning.
The district will see significant savings in interest costs. Originally, it was projected the district would incur an interest cost of 5.59 percent. Gores sold the bonds yesterday at a net interest cost of 3.62 percent, resulting in a savings of slightly more than $2.2 million dollars. The actual interest cost on the bonds will be $4.3 million.
Gores also reported that because of the way the bonds were purchased, the district will be able to use all $11 million for its capital projects fund.
The bonds will mature in 2017.
Gores added the bonds sold well on Wednesday, as many buyers were willing to purchase them at a higher value. Purchasing the bonds at a higher value results in more of a significant cash flow being available for the buyer, said Gores.
"The main reason they (buyers) do it is because they are convinced interest rates are going to go up," said Gores.
In the end, the $11 million in bonds were sold for $11.2 million. The district is able to utilize the $239,183 in premium money gained to pay for the underwriting of the bonds. Gores' company is being paid $77,660 by the district for selling the bonds, leaving $11.1 million left to utilize for projects. The money in excess of $11 million will go into the district's debt service fund to help pay for costs associated with the project.
The bonds that were sold are exempt from federal income tax because the money is being used for a public improvement project.
The Yakima county treasurer is expected to release the money for the bonds to the school district on March 25. This is the same date as the March school board meeting, at which time local directors are expected to approve the hiring of an architect to begin work on the design phase for the construction of the new school.