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Federal Way schools' bond sale saves taxpayers millions
The bond sale results are in — and Federal Way residents have saved a bundle.
The Federal Way School District sold the last of bonds for the $149 million construction project bonds. By switching to a new program offered by the government, the district saved taxpayers $9.7 million in interest payments.
The issue went out to bid on Tuesday and the winner was M&I Bank, which would charge 5.5 percent True Interest Cost.
In the past, the district has gone for tax-exempt municipal bonds. However, this year as part of the government's stimulus package, there is a new option for bonds called Build America Bonds. They are sold as taxable bonds, but the federal government reimburses 35 percent of the interest paid.
With the Build America Bonds (BABs), the rate is brought down to 3.6 percent TIC, saving Federal Way taxpayers almost $10 million.
BABs are fairly new and have been around since July. So far, the Everett School District and Lake Washington School District have opted for them, Chief Financial Officer Sally McLean said.
McLean said she had talked to several school districts and two financial advisors about the BABs, and she feels confident in them.
This is the lowest interest cost to date for the district. The first round of $45 million worth of bonds was sold in October 2007 at 4.3 percent. The second round of $37 million was sold at 4.99 percent.
The $9.7 million is much higher than what the district originally estimated the move to the Build America Bond would save them up to $8.4 million.
The $149 million construction bond, which was approved in May 2007, was originally scheduled to sell off bonds in five increments of $25 million. However, due to favorable market conditions for bond sales, the district sold more than that the first two years, at $45 million and $37 million. There is still one more sale to go.
The $149 million bond will rebuild five aging schools: Lakota Middle School and Lakeland, Panther Lake, Sunnycrest and Valhalla elementary schools.
The district’s transportation center, central kitchen and maintenance facilities will be rebuilt and relocated to an area near Celebration Park.
The bond will trigger $20 million in matching funds from the state to provide improvements to 23 Federal Way schools built before 1990, with the exception of Federal Way High School. Renovations will include repairing items such as heating, roofs and plumbing.
The district plans to complete the projects by 2013.
The bond will maintain the current property tax rate at $4.19 per $1,000 valuation of property as previous bonds expire.