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Detroit-Detroit Public Schools’ Emergency Financial Manager Robert Bobb today announced the remaining $210.54 million of the $500.5 million capital improvement bonds voters approved through the Proposal S Bond Referendum are sold, saving taxpayers $67,481,000 in interest and giving the District the necessary funding to finance the rest of the 18 school construction and renovation projects through 2012.
Proceeds from the bond sale are expected to be available to the District by Oct. 28. One renovation project at the John R. King PreK to 8 school was completed this summer; nine other projects are currently underway. The remaining eight projects will begin this fall.
“We’re meeting our commitment to Detroit voters without whose support these projects would not be possible,” Bobb said. “With this final sale of bonds, we will very promptly have awarded contracts for 100 percent of the work under Proposal S.”
The sale included $160,910,000 of Qualified School Construction Bonds (QSCBs) and $49,630,000 of Build America Bonds (BABs), totaling $210.54 million. Both bond programs were authorized under the American Recovery and Reinvestment Act of 2009 (ARRA) enabling schools to issue capital improvement project financings at low-interest costs.
The QSCB and BAB programs allow DPS to issue debt at taxable interest rates, then receive subsidies from the federal government equal to 35 percent of the payments on the BABs and an amount equal to the federal tax credit rate on the QSCB. The rate on the QSCBs was 6.645%, which the federal government will subsidize up to 5.01%, bringing the net rate to the District to 1.635%, which is a 1.56% decrease from the 2009 QSCB net rate of 3.19%. The rate on the BABs was 6.845%, and after the 35% federal subsidy, bringing the net rate to the District at 4.45%, which is a 0.53% decrease from the 2009 BAB net yield of 4.98%. The issuance of the Build America Bonds and Qualified School Construction Bonds saved the School District approximately $67,481,000 in interest cost over the life of the bonds as compared to traditional tax-exempt financing.
Construction starting this fall includes:
– a new gymnasium at Bunche Elementary School to be completed by September 2011;
– a new academic wing and arts addition at the Ellington at Beckham school and ready for move-in starting May 2011;
– renovation work at Northwestern High School to be completed by September 2011;
– four new schools will also break ground: Munger PK-8 School, Mackenzie Pk-8 School, Mumford High School, and Finney Crockett High School. Mackenzie and Munger schools will open December 2011, and Mumford and Finney Crockett High Schools will be completed by September 2012.
More than 3,900 direct and indirect jobs were created under the $500.5 capital improvement project, according to the state of Michigan employment formula.
Detroit voters approved Proposal S last November which enabled the District to access $500.5 million for school capital improvement projects. DPS received the 6th largest allocation in the nation.
The DPS School Construction Project includes a total of seven new schools and eleven renovations. The improvement program also includes District-wide technology upgrades and security initiatives being funded with the Proposal S dollars. To comply with federal guidelines, all bond dollars must be spent within three years and all 18 schools must be completed by September 2012.
Siebert Branford Shank & Co. and JP Morgan are the lead underwriting firms on the bond sale.
For more information and to download photos of construction sites: www.dpsschoolconstruction.org.