LL Board of Education approves sale of $5.9 million bond


The Los Lunas Board of Education approved the sale of a $5.9 million bond, the first installment of a $25 million bond authorization approved by voters in February 2012.

The Los Lunas Board of Education approved the sale of a $5.9 million bond, the first installment of a $25 million bond authorization approved by voters in February 2012.

"The best bid was submitted by the firm of Raymond James & Associates for an effective interest rate of 1.64 percent," said Kevin Powers, director at RBC Capital Markets. "That's a very strong bid and an outstanding interest rate."

The second bid, at 1.78 percent, was given by the Baker Group. Bidding took place electronically using PARITY.

The bond was revised by $15,000, making the total bond sale $5,915,000. The additional $15,000 was needed because of the structure of the bid, but in the end, the district actually receives a greater savings and the total payments on the bond went down, Powers said.

The interest cost to taxpayers on this bond issue is $932,500.

"That is really dramatically reduced from what you would of expected or what you would have experienced five or six years ago when interest rates were 3 and 4 percent," he said. "In fact, that's half of what it would have been three or four years ago."

By having a much lower interest payment, the bond capacity is expanded, enabling the district to sell more bonds in the future, and do more tactical improvements, he said.

The district will also save about $53,000 over the life of the loan.

"It's one of the best sales we've ever had in recent history," said Superintendent Bernard Saiz. "As far as what we will get back from the actual sale."

The $5 million will be used for new projects and to complete the Los Lunas High School renovations.

The $900,000 will be used to refinance the remaining debt on the Series 2004A bonds at the new interest rate, a savings of about $42,000.

"The money will be spread to every school in the district," Saiz said.

Some of the new projects include a new roof for Valencia Middle School, upgrades including HVAC, playgrounds and work sites, with the lion's share, $3.5 million, going to complete the high school renovations.

The district's bonds received eight bids, the most bids on a bond in 10 years, said Powers.

The district has an A-1 credit rating from Moody's, which is a good rating, but Powers said they certainly would like to see the district attain a double A category.

"It's not out of the question," he said. "It's possible in the next four or five years."

With the New Mexico School District Credit Enhancement Program, the district's rating bumps up to Moody's double A rating, which gives a kind of blend between the two, but with a national double A rating the district could attain even better interest rates, he said.

Moody's Investor Service sited the district's strengths including continued growth of the tax base through the village's modest, but continued residential development.

Moody's median fund balance for school districts is 9 to 10 percent of annual revenues, and right now, the school district's fund balance is right around 2 percent, Powers said.

The challenges the district faces is to be more flexible with its cash balance and general fund reserve during state educational cuts and declining enrollment.

In recent years, the district's conservative budget management has improved financial operations from the number of years that funding operations had reoccurring revenues that didn't keep up with reoccurring expenditures, which ate into the fund balances, Powers said.

"The way we're attacking that is, we're continuing to closely monitor our student enrollment with our revenues and expenditures," said Claire Cieremans, chief financial officer.

"Trying to make adjustments early on so that we don't get in the situation where we were before, where our cash position and our fund balance was declining,"

The district attributes declining school enrollment to the opening of the charter school and families moving closer to Albuquerque because of gas prices, and state educational cuts have made for a tightrope balancing act.

All in all, it was a great sale, Moody said, and he's very pleased with the progress the district has made in recent years, he said.

-- Email the author at dfox@news-bulletin.com.