On May 17, 2017, the North Royalton Board of Education met to begin plans for the design, construction and renovation of the district’s buildings, specifically different construction methods, timeline and legal obligations, and processes when working with the Ohio Facilities Construction Commission. David Riley, the school district’s legal counsel, answered questions and helped advise the board and administration on these issues. Riley is one of the premier legal construction counselors in Northeast Ohio and represents many school districts in these types of projects.Sale of the Bonds
On July 11, North Royalton City Schools' administrators met with representatives from Moody's Investor Services to speak to them about our district, our plan, and our strong financial position. Based on this meeting, Moody's issued our district a credit rating of AA2, which is a strong rating for a school district.
Due to this strong rating, on July 25, Treasurer Biagio Sidoti and Assistant Superintendent Jim Presot, along with our underwriters from Stifel, Nicolaus & Company, sold our $88.9 million worth of bonds for a total interest cost rate of 3.69%. This was better than the anticipated interest rate of 3.75% which will allow us to keep our commitment to our homeowners ($109 per year tax increase per $100,000 home value). The reduced interest rate will also save our taxpayers in interest rate expense as we begin to pay back the bonds. Deposit of the funds into our account has been completed.Selection of an Architect
While all of this was occurring, we solicited requests for qualifications from architectural firms and construction manager firms. On July 13 and 14, as well as August 1, we interviewed four architectural firms. At the Board of Education meeting on August 14, the board approved ThenDesign Architecture (TDA) as the architectural firm for our project. "Not only does TDA focus their business on designing educational facilities, they also have a strong reputation of engaging staff and community in the educational visioning process," said Superintendent Greg Gurka, North Royalton City Schools. "The process of listening to our stakeholders prior to designing is critical to me and to the overall success of the project."Selection of a Construction Manager at Risk
The district is utilizing a Construction Manager at Risk (CMR) delivery method that includes a commitment by a Construction Manager to deliver the project within a Guaranteed Maximum Price, based on construction documents and specifications. The CMR provides professional services and consults in the design development and construction phases. “There are many benefits from using a Construction Manager including an increased level of cost control from the start,” said Gurka. On August 1, Construction Manager (CM) Requests for Qualifications (RFQs) were due. We received 10 firms or combination of firms that would like to be considered. After reviewing the RFQs with the board and administrators, selected firms were brought in for an interview on August 28. On September 11, Hammond Construction was approved by the Board of Education as the Construction Manager at Risk. Hammond has extensive experience building schools and provides a strong team of construction professionals that will lead the project.Educational Visioning
The first part of the North Royalton City Schools' facilities construction process is educational visioning, a collaborative process that results in a comprehensive planning tool that will set the direction for the district's curriculum and design of our facilities. On September 11 and 12, architects from ThenDesign Architecture (TDA) visited all of the school buildings to meet and talk to the staff, as well as look around to get a general feel for the educational processes and cultures of each building.
The second part of this educational visioning process for the North Royalton City Schools' Facilities Project took place on Thursday, September 14, led by architects from TDA. More than 120 people came together at the North Royalton Baptist Church in North Royalton to participate in an all-day discussion to help the district and Board of Education create a shared vision of the facilities project for our schools and community. The group consisted of a cross-section of the community, including representatives from each grade level, department, special area and grade level teams. In addition to a representation of students, teachers, support staff, and administration, the district had individuals from our community who reached out to volunteer their time or responded to the district's invitation for community participation. They included civic officials, parents, community members, and business partners. The completed report was approved by the Board of Education at the October 9 meeting. Areas addressed include building blocks for student-centered learning environments and curricular and cultural goals. This includes core academics, elective curriculum, administration, safety and security, outdoor learning, PE/athletics, music/performing arts, media center, science and STEM, student storage and lockers, maintenance/custodial, special education, visual arts and student dining/food service. "As we stated last month, this will be our guiding document during the design process, in conjunction with the additional conversations that will be held with staff and community members," said Superintendent Greg Gurka.Click here
to review the educational visioning report.
Community Meeting - January 3, 2018
On January 3, 2018, more than 100 people attended a community meeting to hear and discuss the progress of our facilities project, as well as provide input into the design of the exterior of the buildings. ThenDesign Architecture (TDA) presented the input received from various educational visioning sessions held this fall with a cross-section of community members. They shared preliminary sketches of the interior layouts of the elementary and high school buildings, as well as a tentative construction timeline. Residents viewed more than 10 schematic designs and pictures of what the exteriors of both buildings can look like and shared thoughts on their preferences. These comments will now be taken into consideration as we move forward with the schematic design phase. We continue to meet with grade levels and departments to talk about spaces and specific needs. TDA continually refines and redesigns based on these conversations.
The 4.9 mills that was approved on May 2 from North Royalton voters will cost $9.04 per month per $100,000 of assessed property value beginning in January 2018. This amount factors in the drop off of the existing middle school bond issue and the establishment of a maintenance fund earmarked to maintain the buildings.
How Will Funds be Used . . .
Funds are being used to build one new centralized elementary school, to be located on the 23 acres of district-owned property on the southwest corner of State Road and Valley Parkway. Funds also will be used to renovate the middle school for today’s learning environments and renovate and rebuild the high school to focus on student-centered learning. A new 100,000 square foot section will be built onto the rear of the high school that will contain regular classrooms, science labs, and other educational spaces.
Also, as part of the bond issue plan, there will be permanent improvement projects that will be completed throughout the next several years. At the middle school, this includes replacing roofing and HVAC units, redesigning the media center, updating technology infrastructure, as well as designing learning spaces for STEM and other areas of the curriculum. At the high school, this includes renovating the 1970s and 1980s areas to include new science labs, media center, expanded space for the music department, as well as the installation of new HVAC, lighting, roofs, door, windows and safe and secure entrances. The full plan is available on the district website.
An Overview of the North Royalton City School District Bond Issue Sale
On May 2, 2017, our community overwhelmingly approved a bond issue to build and renovate our existing buildings. A new elementary school will be constructed on the southwest corner of State Road and Valley Parkway to house the district’s preschool through fourth-grade students. A new 100,000 sq. ft. section of the high school will be constructed to replace the 1950s and 1960s section, with renovations being done to the 1970s and 1980s sections. In addition, renovation of the middle school will also be completed.
North Royalton City School District officials met with Moody’s Investors Service on July 11 and discussed the bond issue including the overall financing plan, the facilities plan funded by the bonds, and other credit characteristics of the district such as tax base, district management, and operating philosophy, and finances. Moody’s Investors Service placed its third highest credit rating of “Aa2” on the district and the 2017 bonds.
Due to this strong rating, on July 25, the district sold $88.9 million worth of bonds for a total interest cost rate of 3.69%. This was better than the anticipating interest rate of 3.75% which will allow us to keep our commitment to our homeowners ($109 per year tax increase per $100,000 home value). The reduced interest rate will also save our taxpayers in interest rate expense as we begin to pay back the bonds. This strong “Aa2” credit rating was instrumental in achieving the pricing result the district was able to obtain on July 25. Funds were deposited into our account on August 15.
During the 1½ hour order period, the district’s bond issue received more than $350 million in orders from 53 different investors. This overwhelming demand for the district’s bonds allowed for a downward adjustment of interest rates after the order period ranging from
- 1 basis point (0.01%) in the 2047 maturity,
- 2 basis points (0.02%) in maturities 2033 – 2037,
- 5 basis points (0.05%) in maturities 2018 – 2024 and in the 2032 maturity,
- 8 basis points (0.08%) in the 2025 maturity,
- and 10 basis points (0.10%) in maturities 2026 – 2031.
A sampling of investors which purchased the district’s 2017 bonds were Vanguard, Eaton Vance, State Farm Insurance, Travelers Insurance, Wells Capital Management, American Family Insurance, Boston Company, Nuveen Advisory Corp., Northern Trust, JP Morgan, Credit Suisse Asset Management, Key Bank, Huntington Trust Company, US Bank, Blackrock, Goldman Sachs, in addition to many others.
In the two weeks leading up to the pricing on July 25, tax-exempt interest rates slowly declined by approximately 15 basis points (0.15%) which provided a strong “tone” to the market. In the week prior to pricing the bonds, two events occurred that caused interest rates to continue to decline and inject a more cautious “tone” among investors. On July 18, 2017, Republican leaders in the US Senate suspended their efforts to repeal Obamacare for the time being, causing bond investors to question the administration’s broader reform agenda. Also on July 18, the National Association of Home Builders (NAHB) housing market index posted disappointing results providing a more cautious tone to the economic recovery picture. Both of these events resulted in interest rates declining by approximately 3-5 basis points from July 18 to July 19, and a strong market tone for the rest of the week and continuing into Monday, July 24 (the day prior to pricing the bonds). Interest rates in the municipal market were also heavily influenced by the supply of municipal bond issuance and the week of July 24 was no different. In Ohio, the district’s bond issue was the largest issue in the state, and nationally for the week of July 24. New issuance tax-exempt bond volume of approximately $3.5 billion was approximately half of what has been typical so far in 2017. These factors provided a focus for investors to concentrate on the district’s bond issue.
At the end of the day, the district was able to successfully sell all $88.9 million of bonds at a weighted average true interest cost of 3.69%. By all metrics, this issue was a successful sale for the district and the district’s taxpayers.
The bond issue was structured to provide for level debt service over the 30-year period, and the bonds were sold with an optional call provision allowing the district to refund for economic savings at some point in the future bonds maturing on and after December 1, 2025.
We are excited that the district was able to get to market so quickly to take advantage of this great interest rate environment. Thanks again to our community for approving the May 2017 bond issue, allowing us to sell the Bonds and securing the facilities needs as it relates to instruction for future generations.
North Royalton City Schools Assigned an Aa2 Rating by Moody’s Investor Service
The North Royalton City School District recently completed a credit rating review in preparation for the sale of bonds to finance a new elementary building to replace three existing buildings, renovations to the existing high school and middle school, and to construct a new academic wing onto the high school. Moody’s Investors Service assigned an Aa2 rating to the $88.9 million bonds. The Aa2 rating is two notches below the highest possible rating of Aaa. The district is one of 62 school districts in Ohio sharing the Aa2 rating with 26 district rated higher and 223 districts rated lower.
In a credit opinion released on July 19, 2017, Moody’s Investors Service substantiated the rating by highlighting the following strengths: sizable residential tax base with above average socioeconomic characteristics and strong financial reserves and liquidity. The report also cited positive operating trend is largely a result of stable operating revenue, along with management’s effectiveness in restraining expenditure growth.
District administrators presented to Moody’s rating analysts on July 11. The presentation included the district’s financing plan, financing schedule, district profile, levy structure and tax rates, effective and efficient expenditures, financial status, and credit highlights.
The district will now proceed with the bond sale currently scheduled for July 25, 2017. Residents of the district interested in purchasing the bonds can contact Financial Advisor Associates Katie Carp, of Stifel, Nicolaus & Company, by phone at 440/250-1630 for more information.
Purchasing of Bonds
Anyone interested in purchasing the North Royalton SD Series 2017 Bonds should contact Katie Carp, Financial Advisor Associate, Stifel, Nicolaus & Company at [email protected]
or 440/250-1630. Local retail investors will have a priority position as far as orders put in for the bonds on the pricing date, which is estimated to be July 25, 2017. That means that local retail orders at the same yields as larger institutional orders will be filled on a priority basis. Regarding interest rate levels on the bonds, those will become available through Katie Carp on July 24. The Preliminary Official Statement is scheduled to be released on or about July 20, 2017.