by Cary Reese
In November of 2019, voters in Kane County approved the issuance and sale of not more than $23,000,000 principal amount of general obligation bonds to be used for the construction of a new elementary school in Kanab. Kane School District (KSD) sold our bonds on December 9, 2020. Eleven different financial companies bid on the bonds.
Due to the AAA bond guarantee from the State of Utah, coupled with a high bond rating given to Kane School District by Moody’s rating agency, the bonds sold at a premium and with a very low interest rate. KSD was able to sell bonds with a principal amount of $21,150,000 and receive a premium of $2,392,328 from the buyer, and at an interest rate of 1.36 percent.
After paying all bond issuance costs, KSD received a net amount of $23,311,210 to be used for the construction of our new elementary school. Therefore, KSD was able to raise funds of $23,311,210 by incurring debt of only $21,150,000. The principal amount of $21,150,000 is to be repaid over a twenty-year period. After the first ten years, KSD can work on paying off the debt early if funds allow.
After receiving bids for all aspects of construction, the total cost of construction will be $28,540,245. This includes a contingency amount of $1,056,600 to cover unexpected things that may arise. Total construction cost will exceed bond proceeds by $5,229,035. This excess will be covered by capital funds which KSD has been saving over the past years.
In short, in order to save taxpayer money, KSD issued/sold bonds with a face value of $21,150,000 rather than $23,000,000, as was the maximum amount approved by taxpayers in the November 2019 election. KSD did not and will not impose a debt service tax levy to repay this debt, but will pay it mainly from a voted leeway approved by Kane County taxpayers in 2012.
Additionally, KSD will use capital funds saved over past years to cover the amount of construction costs that exceed net bond proceeds. These capital funds do not require repayment, thus saving substantial principal and interest costs. In other words, KSD is building a new elementary without any additional taxes from taxpayers.
For questions please contact Cary Reese at 435-644-2555 ext. 2.