Financing the Route 329 elementary school and education center project could have a net 1.91 millage impact on taxpayers in Northampton Area School District.

The millage impact estimate is part of a proposed financing plan for the project by Jamie Doyle, PFM Financial Advisors LLC managing director, who made a presentation and then answered questions from school directors during the Oct. 9 NASD Board of Education meeting.

PFM is the NASD financial consultant.

Displays on a large screen in the Northampton Area High School auditorium included a sample motion for authorization to proceed with financing of the project. The motion to proceed could be on the agenda of the next school board meeting, set for 6:30 p.m. Nov. 13.

If approved, the school board would authorize the administration to work with PFM, as financial adviser, and King, Spry, Herman, Freund and Faul, as bond counsel, to issue general obligation bonds, series of 2024, in the approximate amount of $34,900,000; series of 2025, in the approximate amount of $27,765,000; and series of 2026, in the amount of $7,170,000, in a competitive Internet auction to fund a capital improvement plan for the Route 329 school complex, which is estimated to cost $73.6 million.

The millage impact is listed on the summary of the proposed financing plan, with the net millage impact as 0.67 mill for 2024; 0.43 mill for 2025; 0.43 mill for 2026; 0.42 mill for 2027; and minus 0.04 mill for 2028, for the total 1.91 mill impact spanning five years.

If the school board votes for authorization, the next steps would be to adopt parameter resolutions at the school board meeting Dec. 4; pricing 2024 bonds at the Jan. 3, 2024, board meeting; and settlement of 2024 bonds at the Feb. 7, 2024, school board meeting.

Other topics covered by Doyle included a municipal market update as of Sept. 30, including historical municipal marketing data and 10-year municipal marketing data; federal tax laws; arbitrage rebate considerations; parameters resolution; a summary of estimated construction costs; and a summary of a proposed new money financing plan.

A copy of the detailed presentation was to have been posted Oct. 10 on the NASD website, nasdschools.org.

Doyle told the school board and audience the financial market represents an opportune time for NASD to finance the Route 329 project.

“We’re enjoying an inverted yield curve,” Doyle said. “The rates are higher for the first time in a long time. The school district is earning some interest on its reserves. It’s really the best of both worlds. It’s very, very attractive.”

Doyle said rates for borrowing are 4.5-4.75%, and rates for interest are 5.5-5.75%.

“There’s now a 1.5% interest in favor of the school district. And you haven’t had anything like this in a decade,” Doyle said. “It comes as a surprise to people because of all the doom and gloom in the news.”

In the presentation, it was said PFM analyzed a proposed financing plan for the new Route 329 elementary school and education center. The analysis illustrates a three-step capital plan for 2024-26.

Doyle explained federal tax law permits an issuer to borrow at a tax-exempt interest rate and invest the proceeds at an unlimited taxable yield if three tests can be satisfied.

The expenditure test says the issuer will spend 85% of the proceeds within three years. The time test says the issuer will incur a substantial binding obligation such as signing a design contract and awarding a construction bid within six months, equal to at least 5% of the borrowing amount. The due diligence test says construction of the project will proceed, and the bonds funds will be spent, with due diligence to completion.

The parameters resolution for the bonds authorizes the financing team to issue the bonds in order to enter the market when it is most advantageous.

“You can enter the market on the best possible day in the market. It’s all about flexibility,” Doyle said. “The district will not need to hold special meetings to approve the final pricing of the bonds.”

Doyle said refinancing of existing bonds is not recommended at this time.

“You have really low rates in your portfolio that are not refinancing opportunities,” Doyle reported.

Of the Route 329 project financing, Doyle said, “None of this is static or cast in stone. This will continually get adjusted. The district has done a good job of maintaining its debut service.”