Cassville bonds sold
First State Bank purchases $1 million, facilitating sale of other $3 million
The Cassville school district $4 million no-tax bond issue was passed by the voters in April, and since then, all $4 million worth of bonds have been sold.
Richard Asbill, Cassville superintendent, said political subdivisions, when it comes to something large like capital projects, in this case building new facilities and renovating facilities, generally pursue bond issues.
“That means it goes to the voters, and if approved, the district is allowed to sell bonds,” he said. “A bond works very similar to a home mortgage.
“Cassville had a $4 million bond issue, and in contrast, there is a $165 million bond issue in the Springfield school district, so it can be a variety of amounts.”
Asbill said the school district is taking out a loan, and instead of going to one bank and asking to borrow $4 million, they sell the investments in blocks.
“The amount depends on what the individual investor would like to purchase,” he said. “Cassville has typically always offered those bonds locally first, then opens it up to other investors.
“The investor buys a piece of the loan that the district has taken out.”
Asbill said the investor gives cash for their purchase, which the school district gets to use up front for project purchases.
“Then, the investor receives the benefit of the interest that we borrow, and that is paid back to them in either 5-, 10-, 15- or 20-year notes, depending on which bonds they buy,” he said. “The interest is predetermined, and in addition, when you buy school bonds, the interest that is returned to them is their profit.”
Asbill said that returned interest is tax-exempt for the investor.
“In our case, those bonds were offered up locally, and First State Bank purchased $1 million in bonds,” he said. “That is a very significant purchase for us, and that goes to say for First State Bank support for their school districts, whether that be Monett, Pierce City, Purdy, Wheaton, Southwest or Cassville.
“We are very pleased that First State Bank made a local purchase of our bonds.”
Asbill said of the $4 million in bonds, all $4 million have been purchased.
“First State Bank making that $1 million purchase benefited us greatly,” he said. “Because, once you have a large component of bonds purchased, it assists the district greatly with selling the rest because it becomes a supply and demand type of thing.”
Asbill said that support was very influential in getting the rest of the bonds sold expeditiously.
“Another piece to the bonds is that Freedom Bank will be the depository of our bond proceeds,” he said. “They will hold the bond proceeds in an interest-bearing account, and they will allow us to make withdrawals as the construction, renovation and other projects begin.”
Asbill said the district has always tried to utilize local banks and believe the local banks have always been beneficial to supporting the school’s efforts.
“With bonds, you have what is called a coupon rate and a yield rate,” he said. “In comparing those, when you look at the yield rate and get around a 2.4 percent, what it turns out to be is about a 4 percent average interest. You get the average based on if the investor bought the 5-, 10-, 15- or 20-year bonds, and the interest rate on some of those bonds will be different, but in the end, we look at what we will average.”
Asbill said the school district was fortunate in how it approached selling the bonds and being able to take those in a July 1 time frame.
“It was beneficial to the district because we were able to take advantage of the low interest rate and provide a good return on the individuals that purchased them,” he said. “The bonds are set to mature at 20 years, but the Board of Education has always been vigilant in any opportunity to save interest.”
Asbill said over that 20-year span the district will put in something called a call feature, which allows the district to call those bonds on a certain date rather than going out the full 20 years.
“This early call feature will allow us to make pre-payments, which in the end save local taxpayers money by not paying the interest but rather the principal,” he said. “These bonds do have a AA+ rating.
“I am very pleased that we received a AA+ rating. That makes it a very good bond payback structure, as well as the investors looking at our bonds know it is a secure investment and the Cassville school district is in very good shape to pay for those bonds.”