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Jett Sett

Saint Louis, MO

#1 Jan 16, 2013
Got some new math goin on at Fox where the super says 9 + 9 = 23. Whatsup wit dat???

The school asked permission from voters to borrow $18,500,000 in August 2012. Voters ok’d the deal. Here is the ballot showing the request: http://www.scribd.com/doc/118152115/April-17-...

Now Supt. Chritchloe writes a letter saying a miracle has happened and somehow 18.5 million is gonna turn into 23 million. Whatever the explanation, voters did not approve borrowing 23 million.

Listen to the explanation.“the district EARNED more than anticipated”. How do you earn an extra 24% from a lender? You don’t. The district is borrowing 24% more than authorized.

Much like the Nash hire, the decision to borrow more than authorized and hide behind an irrational explanation is a stick in the eye to voters.

Supt letter:
In November, 2012, when the first half of our bonds were issued (approximately 9 million dollars), the district earned almost 2.5 million dollars more than anticipated. This was fantastic news for our district. So much so, that we asked the building principals to put together additional lists of wants and needs for their respective schools due to the extra funding. Furthermore, we anticipate when the second half of the bonds are issued in late spring, we will receive another 2 million dollars more than expected. This means that our 18.5 million dollar “NO TAX INCREASE BOND ISSUE” has the potential to become a 23 million dollar “NO TAX INCREASE BOND Issue”, at NO cost to the tax payers.
You may ask yourself, how can this occur? As much as we would like to predict the market, we can’t. However, all the stars aligned (and the market) for the school district. The issue was run at the best possible time in today’s market. The important thing to keep in mind is that our students will benefit greatly. Please check the district’s website for the progress of our bond issue.
Common man aka Kelsey

Imperial, MO

#2 Jan 16, 2013
Jett Sett you better do some research before you put your foot in your mouth. It in fact does have to do with when the bonds are sold and interest rates. That fact they are correct on. Go ask you local bank in Arnold. The bank there in the parking lot of dierbergs has a man by the name of Tom that would be more then happy to explain it to you.
Kelleigh

Malden, MO

#3 Jan 16, 2013
I think you are missing the point Kelsey. The point is the school is borrowing more than authorized by voters.
Common man aka kelsey

Imperial, MO

#4 Jan 16, 2013
Still think you should do some research. You might learn how bonds work.
Steve Sanders

United States

#5 Jan 16, 2013
Kelleigh wrote:
I think you are missing the point Kelsey. The point is the school is borrowing more than authorized by voters.
No they aren't. They made more than anticipated from the sale of the bonds. It's pretty simple finance.
For a fact

United States

#6 Jan 16, 2013
So do you know for a fact.that the face value of the bonds is $18500000, meaning the school will only need to repay that amount back.

And do you know for a fact that $18500000 of bonds sold for $23000000?
Kelsey

Imperial, MO

#7 Jan 16, 2013
What makes a bond different from other loans is that it is a security that can be bought and sold and has a value that fluctuates. In other words is I have this right you can buy low but sell high. The district is out no more money. They made money. Which is good. I don't see how you argue that point. Research.....
Top Gunn

United States

#8 Jan 16, 2013
Kelsey wrote:
What makes a bond different from other loans is that it is a security that can be bought and sold and has a value that fluctuates. In other words is I have this right you can buy low but sell high. The district is out no more money. They made money. Which is good. I don't see how you argue that point. Research.....
Simple math if you borrow 23 instead of 18 million, payments will be significantly higher period.
For a fact

United States

#9 Jan 16, 2013
The only way a bond can sell for above face value is for the interest rate on the bonds to be set higher than market conditions.

In order for the. school to gain a 24% premium, the interest rate set on the bonds must be substantially greater than current market rates.

Thus the superintendents claim that the stars had aligned is misleading. Apparently the school has agreed to pay excessive interest rates on the bonds.
Kelly

Saint Louis, MO

#10 Jan 16, 2013
If voters vote on 18.5M, then there should be 18.5M in bonds issued (or less), or the school district is breaking the law. If the interest rate is lower (which it is), then the debt service over the term of the bonds will be less or the term could be shortened, but you can't legally borrow more money. Perhaps the investment bank is giving incorrect advice, or the administration and board don't understand, or someone is not telling the truth. We probably need a stronger board that can ask the right questions.
Kelsey

Imperial, MO

#11 Jan 17, 2013
Ok folks this is simple math here.... Let me try this one more time. The school district purchases 18 mil in bonds at a small interest rate. When those bonds are sold they are sold at a higher interest rate. Therefore they only still paid 18 mil for them so that is what they pay back. The extra money they made off the sale does not mean they borrowed more. Sure you approved 18 mil. That is what they borrowed and will pay back. Kinda like buying a house and paying 100k for it and selling it for 125k. You don't pay the bank back more then you borrowed.

While I believe the district has some improvements that need to be made, the buying and selling of the bonds is a crap shoot and the came out on top. You need to focus your negative opinions towards something else.

Like I said research first the way bonds work. I would have to guess most people don't understand what the are voting for when they vote on bond issues. You can also refinance old bonds for lower interest rates and longer terms to make paybacks easier.
remember when

United States

#12 Jan 17, 2013
Oh yeeeaaaaa hoochy has more millions to spend !!!!

Refers to a few million as " aligning of the stars " much like a bobble headed Paris Hilton .
All is well, much love, I love you, no I love you more, you pat my back, no you pat mine mentality.

I guess it was her crystal ball and the moon and the stars that had her sneaking around for a year being a homewrecker on school time for all the highschool kids to see.

Maybe it was the planets , possibly mars that made her think that uneducated fry cook should be in charge of food.

All I know is citizens keep giving and next go round the kids still don't have enough books ! Why is that ?
Kelsey

Imperial, MO

#13 Jan 17, 2013
Trust me I am with you on 99.9 percent of what you say........ I promise. Just on the issue of people thinking they are pulling the wool over our eyes by saying they are borrowing more is all I'm saying is not right.

In my opinion she and the board need to be changed. Term limits should be set. I'm seriously. Ruthann's god love her but she has seen her better days and these ain't them.

Pete Nicholas will be the next one with a job from the district. Wait and see. Not right but its going to happen.

They pride themselves with hiring and sleeping within.
bond trader

Malden, MO

#14 Jan 17, 2013
Here is how the deal works.

Fox Schools have a voter approved $0.33 tax levy to support or pay the interest and principal payments on their outstanding debt. In 2012, the district was making the final interest/principal payment on a 20 year bond issue. When the bonds are paid off, the related tax levy expires and property owner taxes decrease accordingly.

Instead, the district proposed to retain the expiring tax rate by asking voters to approve a “no tax increase” bond issue. This allows Fox to keep the debt tax levy at $0.33 and borrow more money in the financial markets to construct capital improvements within the district.

In August 2012, Fox Schools asked voters to approve issuing $18.5M of bonds. Voters approved.

Somehow, Fox seriously underestimated market conditions, because the expiring tax rate would support borrowing $23M rather than $18.5M. If Fox issued its $18.5M of bonds with a stated interest rate of 3.0%(matching market rates), the district would still need to lower its tax levy.

Market conditions determine interest rates and bond prices. If a school tries to sell bonds with stated interest rates at market rates, the bonds will sell at par value, meaning that $18.5M of bonds will sell for about $18.5M. If the stated interest rate on the bonds is below market rates, the bonds will sell at a discount, or a price less than $18.5M, so that bond investors will still realize market rate earnings from the investment (but the district will owe $18.5M of principal to bond holders). If the stated interest rate on the bonds is above market rates, the bonds will sell at a premium, or a price greater than $18.5M, so that bond investors will still realize market rate earnings from the investment (but again, the district will owe $18.5M of principal to bond holders).

The difference between bonds selling at a discount, or par, or at a premium is the amount of interest costs over the life of the bond issue.

In this case, Fox miscalculated the total bonds needed to be issued at market interest rates to use up the entire $0.33 tax levy. Fox did not want to give up any tax levy, so the stated interest rate on the bonds was increased in order to use up the tax levy. This leaves Fox paying a higher than market interest rate, and makes bond investors willing to pay a premium for the bonds.

This tactic is very questionable, because it effectively circumvents the voter approval. The act of issuing $18.5M of bonds at premium interest rates is the equivalent of issuing $23.0M of bonds at market rates. Questions arise because voters did not approve issuing $23.0M of bonds. Most reputable investment bankers and bond attorneys would not cooperate with this scheme.

The pain will be the future interest costs. In order for Fox to gain a 25% premium on the sale of the bonds, the interest rate needed to increase approximately 75%(from a market rate of 3.0% to a stated interest rate between 5.0% and 5.5%).

Clearly this transaction is an attempt to circumvent the voter approved limit of $18.5M. The premium received from the bond sale is actually upfront reimbursement of the excess interest costs on the deal. Ideally, this upfront reimbursement would be set aside to pay future interest costs. Instead, Fox plans to spend the funds on projects in order to avoid reducing the tax rate.

Sadly, Fox administrators choose to explain the transaction by saying “the stars aligned” and good fortune has shined down upon the school. This is an illegitimate explanation of this financial transaction. The true explanation is that Fox is attempting to outwit the public in its quest to avoid lowering its tax rate.
Finally the truth

Saint Louis, MO

#15 Jan 17, 2013
Amen
Gotta Go

United States

#16 Jan 17, 2013
Time to replace Ruthann and Pete on the school board. They gotta go.
Top Gunn

United States

#17 Jan 17, 2013
It's time to remove the Superintendent and Board and whoever else is connected to this scheme!Can you say "you paid for it"
Dana

Saint Louis, MO

#18 Jan 17, 2013
Two new intelligent Board members would help.
No Pete or RuthAnn.
Otto

Saint Louis, MO

#19 Jan 17, 2013
How can Pete be on the School Board and work at FOX too?I thought that wasn't allowed.
Tom

Arnold, MO

#20 Jan 17, 2013
The IRS and Atty Gen should check this out.

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