CLEARFIELD – Despite some debate at its regular meeting Monday night, the Clearfield County Career and Technology Center’s Joint Operating Committee approved a parameters resolution, 5-1, in order to refinance two renovation bonds.
In addition, the committee set the net present value savings at no less than 2.5 percent of the par value. The bonds were in the amounts of approximately $8 million and $1.4 million from 2005 and 2006.
Committee members Rodney Kitko of Moshannon Valley; James Smith of Philipsburg-Osceola; Jason Sunderland of Harmony; Larry Allen of West Branch; and Ken Veihdeffer of Curwensville all voted in favor. Committee member Phil Carr cast the lone opposing vote.
In the work session, Carr advised that the Clearfield Area School District has a financial advisor and utilizes a competitive bid process for bond refinancing. When asked for a recommendation, he indicated that Clearfield uses Public Financial Management LLC (PFM) of Harrisburg.
Jamie C. Shelby, director of public finance with Robert W. Baird & Co., said his firm acts as both financial advisors and as underwriters. He said there wasn’t any reason that they could not conduct a competitive bid process. However, he didn’t believe it was necessary under the circumstances, as the parameters resolution gives them “flexibility” and allows them to “adjust” to the market.
Shelby indicated while the PFM Group was a “fine firm,” an excess of 60 percent of its bond pricing was done through a non-competitive process. He also said his firm was complimented as “the best” and among “the most aggressive” in Pennsylvania.
“If that’s of any comfort to you,” he said to Carr. At that point, Smith asked if there was sufficient time to advertise for competitive bids. Superintendent of Record Norman Hatten said he didn’t believe the question could be addressed accurately, as market figures could change at any time.
Kitko then questioned Carr about his reasons for hearing another presentation and seeking out competitive bids. Carr believed there was a chance at better rates if they shopped around. He preferred that they consider a presentation from the PFM Group before making a final decision.
Kitko pointed out that the PFM Group wouldn’t be able to provide any more information to them. He said that neither the Robert W. Baird & Co. nor the PFM Group would give them “locked in” rates and savings until hired.
“How would we be any more able to make a decision,” Kitko asked. Carr said that was a “good question.” During the regular meeting, Carr requested that the committee vote on the parameters resolution separately.
In the prior non-voting meeting, Shelby advised the committee that interest rates were down and currently at historic lows. At the same time, he wasn’t certain for how long.
“A lot of things affect interest rates. I can’t look into a crystal ball and predict that, because in two months, I could be wrong,” Shelby said.
As a result, he wanted to call their attention to the possibility of a savings if they opted to refinance those two bonds. He said it would be a longer process for the CCCTC, as they have member school districts. He couldn’t guarantee that the process would be completed this year.
According to him, they will not “lock in” any rates unless they can at least meet or even exceed the minimum savings value established by the committee. Once they obtained those figures, he said they’d attach an addendum to the parameters resolution with specific market rates.
Joseph K. Pierce, attorney at law with Eckert Seamans, of Harrisburg said that by passing the parameters resolution, the committee was requesting for the Pennsylvania School Building Authority to proceed with bond refinancing with the issuance of the 2010 bonds.
In the prepared resolution, Pierce said the 2010 bonds should be issued in an aggregate principal amount not to exceed $9.930 million. He said it should neither have a final maturity any later than Sept. 15, 2025 nor bear an interest rate or yield not to exceed 5 percent.
He said that neither the aggregate principal amount nor the aforementioned interest rate would be achieved. He said there would not be any savings with those figures plugged in.
“It only gives them (Robert W. Baird & Co.) flexibility,” he said. His resolution called for a net present value savings of not less than 2.5 percent of the par value of the bonds.
Kitko asked if Pierce recommended that the committee adopted the resolution with the minimum savings value at 2.5 percent. Both Shelby and Pierce explained that 2 percent is the low end of the threshold while 3 percent or better makes most “pretty happy.”
Shelby said that there wasn’t a “right answer.” But he said most school districts set their minimum savings value in the area of 2 – 3 percent.
By adopting the parameters resolution, Pierce said they would be enabled to initiate the bond refinancing process. He said it would make it easier for them to “pull the trigger” later on.
Kitko indicated that the Moshannon Valley School District engaged in a similar process, refinancing in the area of $3 – 4 million in bonds. He said it resulted in a savings of about $100,000 for them.
“It went smoothly and worked well. I support the process,” he said.