Editors Note: This article was originally published in the March 20, 2024 issue of the Chronicle Progress. Some information may be outdated.
Voters denied district in November vote; bill passes to cap in future
Millard School District completed the sale of $50 million in lease revenue bonds last Thursday to finance major and minor construction projects on both sides of the county.
The biggest project begins this week with a groundbreaking at Millard High School, where a major renovation of the academic, administrative and lunchroom spaces is planned.
Construction on that project is expected to commence around April 10, Superintendent David Styler said at last Thursday’s regular meeting of the board of education.
A groundbreaking ceremony is scheduled to take place at Millard High this Friday, March 22, at 10 a.m.
The last time the district embarked on such a large-scale construction project was when the new Delta High School was built more than a decade ago. Besides the massive Millard High remake, the district is adding classrooms to Fillmore Elementary School as well as renovating space at the Delta Technical Center.
District officials are hoping contractors finish construction on everything by August 2025.
“We’re in great shape. We are ready to go. We’re going to break ground next week on Millard High, and away we go,” Styler said.
Japheth McGee, a vice president at Zions Public Finance, guided the district’s bond sale. He said Moody’s, the rating agency that rated the bonds, gave the district itself an A1 bond rating. The lease revenue bonds were rated as A2. A decade ago the district only achieved a Baa1 rating on its lease revenue bonds.
“A pretty big improvement over the last decade. It wasn’t as good as we hoped. I think we kind of hoped for one notch higher, but didn’t quite get there,” McGee said.
According to Fidelity Investments, Moody’s A1 and A2 ratings are the fifth and sixth strongest investment grade ratings from the agency, respectively. Moody’s Baa1 rating is its eighth strongest.
McGee said when Zions first began to crunch the numbers for the district last November, it was predicted the lease revenue bonds would carry an interest rate of about 4.78 percent. What the district actually wound up getting was a more favorable interest rate of 4.37 percent.
“That saves you guys money,” McGee said.
The district originally wanted to finance the building spree through issuing general obligation bonds, which require voter approval. That vote failed in November, forcing the district to issue the lease revenue bonds instead, which don’t require voter approval—but do cost Millard taxpayers anywhere from a few million to $5 million in extra interest payments over the 35-year life of the bonds.
A bill introduced this past legislative session, SB86, caps how much a school district in the state can raise through lease revenue bonds after a similar scenario played out in a more urban district. The ceiling is $200 million during any three-year period.
The bill emerged after Alpine School District failed to convince voters there to approve general obligation bonds for a new high school. When voters rejected the idea, the district moved to issue $175 million in lease revenue bonds, angering residents there.
The bill still awaited Gov. Spencer Cox’s signature as of press deadline Monday.
Styler said MSD would likely never encounter the need to raise so much money at one time.
Still, the district is now saddled with $50 million in new debt, with its first payment due in October or November. McGee said interest payments on the debt will be due every six months, with an annual principal payment due every May until the bonds are paid.
“You’re roughly looking at about $3 million a year for principal and interest combined,” he told school board members.
Styler has repeatedly said he doesn’t expect the bonds to affect local property taxpayers at all.
Meanwhile, any material financial change within the district will have to be disclosed to bondholders each year until the bonds are paid, McGee added.
He said federal rules meant to protect bondholders require the district’s board to approve annual disclosures of any major financial events—missing a bond payment, paying off a bond, losing insurance on the bonds, or making a huge purchase, such as leasing a fleet of new school buses. Any material change in fiscal status could alter the district’s credit rating, thus, be seen as a material change requiring disclosure.
“Ultimately, disclosure is the board’s responsibility. That’s the most important thing. At the end of the day, if the disclosure doesn’t happen…it’s the board’s responsibility,” he told board members, adding that his office can perform the task for the district if hired to do so.
Styler said the construction manager hired by the district to oversee the building projects will be able to provide a clearer picture to board members on costs next month after all of the bids are received and evaluated.
One item Styler said he wanted to bring attention to was the lunchroom at Millard High. He said plans call for major changes, including installing specialized plumbing and other fixtures into the current space to accommodate future technical education needs. He said the amount of work envisioned will take longer than a summer to complete. He said the district had two options, to either close the lunchroom earlier than anticipated, next April before the end of the school year, or keep it open through the end of next school year and likely delay completion of the total renovation until December 2025.
He said after discussing the issue with the Fillmore campus’ food service manager, it seemed the first option would work best. He said food could be cooked off-site and served in another portion of the campus for the few weeks in April and May of next year that work would need to be done. Board members agreed that was the better option.
