The Kodiak Island Borough Assembly last week authorized the sale of bonds to fund the initial architectural and engineering design for the high school renovation and expansion. Prior to voting on the measure, Borough Finance Director Karl Short gave the assembly an overview on general obligation bonds. KMXT’s Maggie Wall has details.
-(((Boro Bond Sales 4:20 "The Kodiak Island…Rick Gifford. SOC.")))
The Kodiak Island Borough is preparing to go out and borrow $8 million-the first installment of a total of $76 million in general obligation bonds to pay for school construction and associated costs. Voters approved the bond sale in 2009.
Borough Finance Director Karl Short gave the assembly an overview of how the bonding process works-and specifically how he expects the sale and repayment of the $8 million school bonds to play out.
Let’s start with the basics…a bond is a way of raising money-it’s a loan. Someone buys your bond for a set amount and you agree to pay a set amount back-the loan and some form of benefit to the lender, usually interest.
The Kodiak Island Borough will be paying interest on its school money. And it will definitely be paying it back. The trick here is to pay as little interest as possible-and there are hopes-and reason to believe-that the state will help pay some of the loan back.
Any one who has purchased a Savings Bond through their employer knows that when you buy a bond, you pay less than the face value, wait a few years, then cash it in for the amount printed on it.
The borough’s school bonds will work in a similar way. Karl Short:
-((More or less interest))
Short told the assembly that in order to get the best interest rates on the bonds, they are building into the sale a mechanism which allows them to call in-or take back-the higher interest bonds and reissue them at a lower rate, should it be advantageous to do so:
-((11 year recall option))
The key to long-term financing is to get the lowest interest rate possible. The same way your FICO score affects the interest rate on your home loan, the borough’s credit rating determines the interest rate for its loans.
Short said the borough has a very good credit rating-but the state has an even better one:
–((Going through the Alaska Bond Bank))
The Alaska Bond Bank-officially called The Alaska Municipal Bond Bank Authority is a public corporation created by state law to help communities finance capital projects-and the High School renovation and expansion is just the type of project the Bond Bank was designed for.
This $8 million dollar bond sale is the first of several planned over the next few years-as work on the school gets started, continues and finely concludes. Borough Manager Rick Gifford:
–((Rick Gifford on future sales))
Borough Manager Rick Gifford.
I’m Maggie Wall.