The District’s next bond

The Nation’s financial panic threatens the last third of the Red Plan’s bonding. Hardly any investors are buying bonds from any governments. That was the gist of this story in the Trib’s Sunday Paper.

There was a significant portion of the story detailing the Duluth School District’s dilemma which I will quote in full:

Despite present bond market instabilities, Duluth school district officials remain optimistic conditions won’t have much affect on the cost of implementing their “red plan” – a long-range initiative to consolidate and renovate several schools.

Two-thirds of the bonds for the $293 million project already have been sold, with the remaining third slated for sale in the next six months. That flexible time window should save the district from being hit by bad market conditions, according to Mike David, account executive for Johnson Controls, the consulting firm heading up implementation of the red plan.

“If we had to sell them today, that would be a concern. But that’s not the plan,” David said. “The markets are in turmoil right now, but I believe everyone expects them to settle out, and when they do, we will sell them.”

The district is planning for a 5 percent interest rate on the final bond installment. If the market starts pushing that number up, David said it could be worrisome.

“Seven percent or something would obviously be higher than what we are expecting, but it’s difficult to say when it would really start to cause a problem,” David said.

The district received lower-than-expected interest rates on earlier bond sales, providing some wiggle room.

If anything, David said, the district is hoping the economic hard times will prove beneficial for the red plan.

“The fact that other projects across the country will be shelved as a result of this, we will hopefully end up with better pricing when we bid our projects because it will essentially decrease demand,” he said.

One thing you can always count on from JCI is an upbeat attitude. Their kind of jaunty like Paul Newman in Cool Hand Luke when he was lopping off the tops of all those parking meters. It must be the sound of all that loose change.

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