Kentucky Securities Corporation President R. Strand (Stan) Kramer Jr. and Public Finance Manager Rosemary Woodruff discussed bonding issues at a recent meeting of the Harlan Independent Board of Education saying at “current market rates the school district can borrow $2.8 million on their local funding.”
Kramer also said the state has offered enough funding to bond $1.8 million. He added the maximum amount of money the district can borrow under their current tax structure and current state assistance is approximately $4.6 million.
During the discussion, board chairman Joe Meadors said when he first came to the Harlan Independent Board of Education, there were “a lot of local people in the community who bought the school district’s bonds.”
“I guess it was money they had to invest and they were civic minded,” said Meadors. “There were a lot of people in town who bought these bonds. So let me ask, when the bonds are sold private individuals will have a chance to purchase those bonds…? They’ll advertise they have a series 2035 maturity date, Harlan Independent School District, and then individuals will have the opportunity to purchase those bonds, right?”
Kramer responded by saying that was correct.
“You do it more from a civic mindedness,” said Kramer. “If a bond issue is less than $10 million in total size the district will designate what is called a bank qualified bond, which goes into a tax code of how a bank can account for things. It’s a very good advantage to a bank to buy bank qualified bonds.
“To your question, in reality these days when a Harlan Independent bond comes out that’s bank qualified, banks tend to snatch them up in bigger amounts than individuals, because an individual can say go buy a Kentucky certified bond, which is way more than $10 million in size, and so, the interest rate is going to be a quarter to half a percent higher — quite a bit higher interest rate than what they can get buying Harlan’s school bond. So, if they’re doing it, they’re do it out of civic mindedness, because there are comparable investments that pay higher rates of interest.”
Meadors added several years ago the board “found out several of their bonds had not been redeemed years past their maturity dates.”
“That happens from time to time,” said Kramer. “It doesn’t happen near as much now as it used to because it used to be bonds — you actually physically delivered a bond to somebody and the tax code says you can’t do that anymore. It’s all in a computer system now so most everything is happening electronically.”
Kramer went on to say school boards are not notified of presentations and there is no action school boards can take on whether payment is made or not.
The board took no action on this issue.
In other board action:
* Meadors was re-elected as board chairman with Meadors abstaining from voting. Matt Nunez was elected as vice-chairman;
* Agreed to keep the board’s meeting date at the third Thursday of each month at 5:30 p.m. at the Community Learning Center.
Nola Sizemore may be reached at 606-573-4510, ext. 115 or on Twitter @nola_hde.