Interest Rate Spike Halts D122 Working Cash Bond Sale

A spike in interest rates over the past couple of weeks forced the New Lenox School District 122 Board of Education to put a hold on plan to sell $5.6 million in working cash bonds. The plan was to authorize the bond sale at the regular Wednesday Board of Education meeting.

Representatives from investment advisors R. W. Baird Investments told the board that interest had gone too high to follow through at this time with the sale of working cash bonds to fill in the gap in funding gaps due largely to the decline in state funding.

If purchased as planned, the bonds would have a costly impact on the district, which is why R.W. Baird advisors along with District Business Manager Harold Huang decided to hold off. By the middle of last week, Huang said he noticed the spike and sent the board a preliminary packet on Friday, but by Tuesday night district officials knew it looked as if the bond sale wouldn't go through.

"I worked through the morning (Wednesday)," he said, but the financial market hadn't turned around. The initial plan for the $5.6 million working cash bond sale, which is set up as a 20-year obligation, would cost the district $8.5 million. The sale was coupled with the restructuring of $126 million in bonds sold in 2011.

The restructure is intended to stretch the obligation for an additional 10 years, while leveling out the tax rate during upcoming peak years.

Member Patrick Martino said he was glad that Huang and Supt. Michael Sass had agreed to "put the brakes" on the sale until the market was in better shape. Member Kathy Miller questioned whether it might be more prudent to go ahead with the sale if the rise in interest rates was going to persist.

Huang said it's not something he readily anticipates. Previous to the discussion on the interest rates, Phil Adair, a candidate for the school board, questioned the board during the public comment period about their decision to move the two-part financial plan. "In years past we always had a referendum for bond issues. This year it's not happening. Is this going to be the normal procedure now? You're just going to bring it up willy-nilly?"

He went on to say that the board posted notices in the paper, "but you know that 99 percent of the people don't read those."  

President Nick DiSandro told Adair, "we don't bring anything up willy-nilly," and he deferred to Huang for an explanation of the board's process leading up to the plan for the two-part financial plan. Huang noted that the board began studying the possibility in November. It's been the topic for discussion for more than three months now. Sass was offended by Adair's description of a "will-nilly" plan. "You have a right to your own opinion, but you don't have a right to your own facts."

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