From the Field
Is Now the Right Time for a Bond Issue?
By John VanStratt
Pressure on operational budgets for most public school districts in the State of Michigan has limited the resources available for significant investment in buildings and sites to address fundamental security, life safety, accessibility, energy efficiency and infrastructure needs. Beyond funding these essentials, implementing a comprehensive vision for the future to create learning environments that support educational excellence can be even more challenging. The solution frequently lies in attaining community support for a bond issue to fund capital improvements.
If you are contemplating a Bond Issue to establish, prolong or improve educational facilities, we believe now is the right time! Consider these factors in your decision-making:
- The Michigan Legislature modified the School Bond Qualification and Loan Program through Public Act 437 of 2012, effective December 31, 2012. The law caps the program's loan feature when the total SBLF balance reaches $1.8 billion, expected to occur in 2014. The cap expires after June 30, 2016. Consult your bond counsel as there are multiple other changes to the qualification process and several areas that require clarification.
- School districts, in conjunction with bond counsel, are generally required to request a pre-qualification meeting with SBQLP not less than 180 days prior to an election.
- Wall Street financial bond rating agencies have recently upgraded the State of Michigan's credit rating. Fitch Ratings upgraded the State's general obligation bonds to AA from AA-. "The upgrade is based on the state's rebounding economic performance", Fitch said in a news release. State budget director John Nixon said the higher rating will make bonds more attractive to investors and save Michigan taxpayers money on interest payments when bonds are sold to fund building projects.
- Nixon also noted that tax reform and right-to-work legislation have made Michigan more attractive to businesses - a crucial step in assuring future revenue growth.
- National economic recovery is impacting the cost of construction materials. Ken Simonson, Chief Economist for the Associated General Contractors of America, said "For the second month in a row, contractors endured price hikes for gypsum wallboard, lumber, insulation materials and diesel fuel." The Producer Price Index for all construction materials, as compiled by the Federal Government, increased 1.3% during the first two months of 2013 and the trend appears to be continuing.
- In Michigan, the construction industry has substantial capacity and remains highly competitive, leading to great value for investment in facility improvements.
While economic indicators signal improvement in Michigan's overall economy and construction costs remain very competitive, election law timeline requirements and the pending School Bond Loan Program cap signal a call to action for school districts considering a bond issue to upgrade and enhance educational facilities. Ultimately, local economic conditions and gaining the support of your community will be the keys to success.
Miller-Davis Company offers a comprehensive approach to construction services specifically developed to serve K-12 educational clients including building assessments, needs prioritization, cost and schedule modeling, bond application assistance and innovative bond campaign strategies.
"It was important to me and our Board of Education to select a construction manager with a proven track record of success. From the initial organization of a successful bond campaign to the finished product, members of the Miller-Davis team were with me every step of the way."
- Kevin Ivers, Superintendent, Berrien RESA (Former Superintendent for Bridgman Public Schools)
Please contact John Van Stratt, Vice President - Project Management Services, to discuss how Miller-Davis Company can help you achieve functional, sustainable, high performance educational facilities.
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