May election may save millions in proposed Pine Tree bond - KLTV.com - Tyler, Longview, Jacksonville |ETX News

May election may save millions in proposed Pine Tree bond

LONGVIEW, TX (KLTV) -

Released by Vickie Echols with Pine Tree ISD:

LONGVIEW, TX - The Hiring Incentives to Restore Employment (HIRE) Act, which was signed into law as part of H.R. 2847, by President Obama on March 18, 2010, has prompted Pine Tree Independent School District to apply for a new Federal Bond Programs which could potentially save the taxpayers millions of dollars. 

In considering the scope and timing of the current bond proposal, the Pine Tree Board of Trustees took into consideration the current state of Pine Tree facilities, lower construction costs, more favorable bond rates and were aware of the possibility of federal assistance.

"What was a bit unclear was the mechanism for accessing those federal funds and how much was available," said Gil Gillam, President of the Board. "This recent legislation clears that up and emphasizes the importance of going forward with the bond election at this time."

"The new legislation which expands Qualified School Construction Bonds (QSCBs), will affect Pine Tree ISD if the bond referendum is passed in May," said Ed Moore, Senior Vice President, Southwest Securities.   "Taxpayers will save an estimated $6,571,000 interest cost over the life of the proposed bonds by using this program instead of the traditional tax exempt bonds," he said.  "But right now, this program only applies to the current calendar year." 

The district had announced earlier in the year that the projected tax increase for the proposed 2010 bond project would amount to 6.5 cents.  However Moore reports that with the new legislation, the tax rate would drop to a 6-cent increase. 

Moore noted that in order to maximize earnings in the sinking fund, he would structure the bonds to have one principal payment in the last year.  "While working with another district on a bond program, I received a guaranteed investment contract quote earlier this month showing an interest earnings rage of 4.1%.  So in addition to the interest cost savings for the district, Pine Tree stands to earn an estimated $2.1 million in the debt service fund further offsetting the projected tax increase." 

"Delaying the vote until November, because of the time it takes to sell and deliver the bonds, prevents the district from taking advantage of the federal program," said Dr. Strauss, Superintendent of Schools.

"We have applied," said Strauss, "and the funding is allotted on a first come-first serve basis;  so holding the election in May will provide our District every possible opportunity for additional funding to help support the development and improvements outlined in the proposal."

As stated in the March 18th press release from the US House Committee on Ways and Means, this legislation expands Build America Bond's successful direct payment option to include the issuers of qualified school construction bonds, qualified zone academy bonds, clean renewable energy bonds, and qualified energy conservation bonds.

According to the new law, any school district issuing taxable Qualified School Construction Bonds receives direct payments equal to the lesser of (a) the actual interest rate of the bonds or (b) the tax-credit rate for municipal tax-credit bonds that the school district would have received if it issued the bonds as tax-credit bonds. The subsidy is intended to fully or nearly fully reimburse the school district issuer for its interest costs.

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