District 117 holds special meeting to review bond sale status

By Ryne Turke on May 14, 2015 at 7:48am

Just days after receiving word that District 117’s sales tax will be bringing in more revenue than projected, board members approved several action items to continue the bond sale process.

It was released last week that the revised projected sales tax receipts for District 117’s first full year would come out to $2,649,821.  The previous estimated value, which came out in the fall of 2014, was valued at $2,200,000.

During a special meeting last night, board members invited Tammie Schallmo, from PMA Securities, to provide an update on District 117’s bond sales.

Schallmo said that proposals were sent to 13 firms on March 23rd to gauge their interest in District 117’s bond sale. PMA Securities targeted firms that could price retail bonds, had experience issuing bonds through conduit issuers and had a background of underwriting bank qualified and non-bank qualified transactions for Illinois school districts.

Based on feedback from multiple firms on the bond sales, PMA recommended District 117 partner with three investing firms.

Edward Jones was recommended as a Co-Senior manager with 40 percent allocation of the bonds. Schallmo highlighted that Edward Jones has four brokerage offices in Jacksonville, only sells bonds to retail investors and has extensive experience selling bonds through conduit issuers.

Mesirow Financial was also suggested as a Co-senior manager with 40 percent allocation of bonds. Schallmo says Mesirow Financial will focus primarily on selling bonds to institutions and has extensive Illinois K-12 bond underwriting experience.

The final 20 percent was suggested to go to Incapital. This firm would only sell bonds to retail investors.

Schallmo says the combined financing team will enable the district to reach both retail and institutional investors, while achieving the lowest cost of financing.

When examining each company on a “per bond” basis, Mesirow’s fees were the most competitive that focused primarily on institutional investors. Mesirow reported a maximum of $4.05 per bond.

Edward Jones’ and Incapital’s fees reported averages of around $16.57 per bond. These companies would be for retail bonds only.

Underwriters were asked in the request for proposal to provide their thoughts regarding the use of a conduit issuer for the District’s bond sale. Based on the feedback from the underwriters, PMA recommended that District 117 proceed with the sale of its bonds through this process.

Schallmo says that financing through the Illinois Finance Authority or the Western Illinois Economic Development Authority may generate additional bond proceeds.

After the presentation, board members approved the bond underwriters, the financing structure and the conduit issuer for the bond process.

District 117 Superintendent Steve Ptacek says the partnership with PMA Securities has allowed the district to establish the maximum amount of revenue possible from the sales tax.

“Going with a 25-year bond, using WIEDA as a conduit issuer, is going to give the district a better rate. We were hoping to be able to get $24 million out of this as a bond. At a minimum we are going to be able to get $32 million out of bonds. This is very exciting for the district and the community,” says Ptacek.

Ptacek says District 117 should be getting great market value on the bonds sales.

“Interest rates are at a time when we need to maximize our bond sale and sell as many bonds as possible. There is a rate advantage to potentially keeping it under $10 million a year in sales, but you have to compare that to how rates might change over the next year. That is why we have expert involved to help make that decision,” says Ptacek.

“We are going to be offering them to the local investors first.”

Board members will be getting a bond order at the next board meeting. If plans stay on schedule, Ptacek says bonds will start being sold during late June.