Trinidad USD has poison too, but just a bit
I asked about Trinidad’s school bonds yesterday and here’s Trinidad USD’s response. (It looks like Trinidad USD’s debt ratio is 2.5, as compared with 10.2 on the 2011 McK issue. That’s much better, and well within reason, IMO.)
TRINIDAD UNION SCHOOL DISTRICT GENERAL OBLIGATION BOND 2012
Thank you for your interest in the financing of the Trinidad Union School District General Obligation Bonds of 2012.
Beginning immediately after the June 5, 2012 election, the Trinidad School
administration contacted the Humboldt County Auditor and Humboldt County Treasurer for assistance in structuring the bond financing so that the interests of the tax payers would be well served.
Between that time and the closing of the Bond on December 4, 2012, the District
met with or conferred on phone or by email with the Treasurer John Bartholomew on a
continual basis. All financial document drafts were copied to the Treasurer for his
comment, and he also communicated directly with our financial advisors and the
underwriter of the bond. In the end, the District was responsible for any decisions made
relative to securing the bond funds, but District staff did this in as informed a manner as
In reviewing the debt service impact of other public bonds on the tax payer, the
District discovered a wide ranging debt service which varied from approximately 1.8 : 1
all the way to 10 : 1 on the original amount of the bond. A high ratio means a high
payback; for instance a debt service ratio of 8:1 would mean that a $5,000,000 bond
measure would cost the public $40,000,000 over the life of the bond.
The goal of the Trinidad Union School District was to develop a financing plan
which would be at the lower end of that range, thereby saving taxpayers a lot of money.
Our final debt service ratio is 2.52 : 1, or near the very bottom of that range.
Capital Appreciation Bonds (CABs) were a regular part of the discussion of the
financing plan. CABs are, in general, considered the least favorable of the bond options
for the taxpayer, but often must be part of the financing plan in order to attract bond
purchasers. The final bond structure does have some CABs in the structure but at a
low percentage level, as follows:
• $271,235 in convertible CABs (12.3% of the bond issue), which will be converted
to Current Interest Bonds (“CIBs”) which is the least expensive type of bond
readily available to California school districts.
• $88,384 in CABs (4% of the bond issue).
• $1,825,000 in Current Interest Bonds (83.7% of the bond issue)
Because the inclusion of CABs was at such a low percentage level, the net debt
service was impacted only slightly – once again the debt service ratio for the Trinidad
Union School District GO Bond is a very low 2.52 : 1.
We hope you agree that the taxpayer has been well served by a very careful and
collaborative process which included extensive consultation with those experienced
in bond finance at the office of the County Treasurer. The District has made every
effort to be extremely diligent in protecting taxpayer interests, while at the same time
obtaining the funding to make significant deferred maintenance upgrades and/or new
construction. The result of the bond will be improved school quality for students and
higher property values for our constituents, together with taxpayer protection.