February 6, 2019

PPS Successfully Sells Referendum Bonds

By Donald Gilpin

Taking steps to finance the renovation and construction projects approved by Princeton voters in the December 11, 2018 referendum, the Princeton Public Schools (PPS) last month sold $26.9 million in Moody’s Aaa-rated bonds. The sale allowed PPS to access 20-year capital at a favorable interest rate of 2.99 percent, significantly lower than the rate forecast by the Board’s financial advisors in December, according to a PPS press release

With cumulative financing costs for the bonds over the next 20 years more than $1 million lower than the original estimate, the BOE attributed the successful sale to favorable market conditions and the district’s Aaa credit rating. The bonds were sold by competitive sale, similar to an auction, and there were seven different bidders.

“This is the first, successful step of a two-year process to implement necessary facility renovations and upgrades that will improve learning spaces for our current and future students,” said PPS Superintendent Steve Cochrane in the press release. “With assistance from our professional advisors, stakeholders, and community experts, we look forward to completing these important projects thoughtfully, skillfully, and transparently.”

School officials have noted that these funds will address the district’s most immediate and urgent needs, including safety, security, and HVAC upgrades in all the schools, as well as the creation of four additional classrooms at Princeton High School along with a new dining center on the main floor, increased space for athletics, and improved space for student counseling.

“The Board of Education is grateful to the community for approving the $26.9 million referendum, after months of engagement and constructive dialogue,” said BOE President Beth Behrend, “and for its willingness to invest in the future of our public schools.” In the PPS press release she went on to thank Cochrane, his staff, and previous board members for the time and energy they devoted to this effort.

The estimated impact on property taxes of the new bonds was originally approximately $57 additional in the first year,
2020, for an average home assessed at $837,074. Subsequent year estimated additional costs would be about $61 in 2021, about $106 in 2022, and then sizable reductions in 2023 and beyond, after debt from a previous bond has been retired.

Proceeds from the bond sales, according to the PPS press release, have been temporarily deposited in an interest-bearing money market account at the Bank of Princeton. The proceeds will be invested in CDs, Treasury bills, or other short-term instruments until the BOE selects an investment management firm at its February 26 meeting. 

These investments will serve as the operating account for the referendum projects, with disbursements made as needed for project-related expenses. Interest earnings will be used to offset debt service payments for the bonds to the extent possible. 

All accounts and investment instruments into which these funds are deposited will be insured through the State of New Jersey Governmental Unit Deposit Protection Act, which protects deposits of counties, municipalities, and local school districts deposited into a Joint Investment Trust authorized by the State of New Jersey Interlocal Services Act, and/or used to purchase allowable U.S. Treasury or U.S. Agency securities held in the District’s name, according to the PPS press release.

The facilities committee of the BOE, preparing to make a recommendation to the full Board, has been interviewing prospective construction management firms to oversee the renovation and construction projects, which, Behrend said, will be underway at the schools this summer. The BOE will work with that construction manager in planning, lining up contractors, and soliciting bids for the many different projects at the schools.