Bond Issue Success Starts With Sound Planning

DashBoard, March 23, 2016

Submitted by Craig Kahler, Managing Director, Michigan Public Finance, Fifth Third Securities, Inc.

School districts across Michigan are struggling to manage facility, technology and transportation needs while balancing budgets and focusing on instruction. Limits imposed on sinking funds may leave one option for financing improvements—a voted bond issue.

Interest rates remain near historic lows making bond issues an attractive option to fund projects. As demand grows, more districts choose this option to address those needs.

Fifth Third Securities has long supported MASB member efforts to secure financing through negotiated bond sales. Serving K-12 issuers since 2002, we bring a wealth of experience to preparing issues for market and executing the bond sale while securing the best pricing available in the municipal bond market.

We have seen some of the following strategies employed in successful bond campaigns:

Many districts start by consulting bond counsel, the financial advisor and yes, even the underwriter. Focus on learning how to prepare a bond issue for voters and ensure in-depth knowledge of the legal requirements. In addition, thoroughly evaluate the financing alternatives that fit the district’s needs and bond capacity.

School bonds may be eligible for participation in the Michigan School Bond Qualification and Loan Program. The financial advisor and bond counsel can educate administrators and board members on the steps and timelines associated with qualification.

Sound planning is essential. Effective planners begin conversations with professionals early and provide adequate time to thoroughly assess needs/develop a comprehensive plan. Of equal importance is engaging staff, parents and community leaders. Their participation often leads to support that is vital to a successful election.

Ensure the process uncovers every need, including immediate/urgent and long-term needs in priority order with a focus on housing and safety, teaching and learning, and best practices. Understand your community, their expectations and historical support for district initiatives. This phase is often conducted with the assistance of an architect or construction manager.

Once the proposal is finalized, a campaign strategy may be developed. Successful campaigns are often based on personal communication, not robocalls, flyers or signs. Conversations within trusted relationships are more likely to change a voter’s behavior or opinion. The goal is to identify the relationships, activate volunteers, reach voters and ensure they vote. Social media has become an effective tool to communicate quickly and effectively.

One final campaign note—stay within the law! Nobody can afford the distraction of campaign law violation accusations. Your campaign committee’s focus is on voter identification and turnout.

Equally important is monitoring debt after bonds are issued. Bond terms typically permit an issuer to refund bonds at a later date, but only if doing so will reduce the cost of financing. Underwriters and financial advisors work in tandem to identify refunding opportunities, then work with the issuer to pursue a refunding and secure savings for their taxpayers.

(a) Fifth Third Securities is not recommending an action to you as the municipal entity or obligated person; (b) Fifth Third Securities is not acting as an advisor to you and does not owe a fiduciary duty pursuant to Section 15B of the Exchange Act to you with respect to the information and material contained in this communication; (c) Fifth Third Securities is acting for its own interests; and (d) you should discuss any information and material contained in this communication with any and all internal or external advisors and experts that you deem appropriate before acting on this information or material.

Craig Kahler is the Managing Director for Michigan Public Finance at Fifth Third Securities Inc., and can be reached at or 517.324.4040.

VIP Focus articles are company-sponsored advertisements and do not necessarily reflect the views or positions of MASB. It’s intended to provide Very Important Partners with a space to share information of value to you and your district.

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