MAPS board approves issuance of QZAB bonds for energy upgrades and roof repair

Shown is the Kennedy Elementary School building that will be receiving a new roof structure starting at the end of May after the Manistee Area Public Schools Board of education approved the issuance of Qualified Zone Academy bonds this week. (Ken Grabowski/News Advocate)

MANISTEE — When voters in the Manistee Area Public Schools turned down a three-year .95 mill sinking fund millage request in May to make some much needed building repairs, it left the district in a real quandary.

The funds were primarily earmarked at the time for replacing the roof on the Kennedy Elementary School located at 550 Maple Street and to tear down the unused, old middle school building directly east of it. The failure of that millage didn’t keep the roof from leaking and then two months later, what added to the district’s dilemma, was one of the two boilers at Jefferson School broke down.

MAPS administration and board of education members were forced to take another course of action because the failure of that sinking millage didn’t mean the roof was going to stop leaking or the boiler was suddenly going to start working. What happened instead was some “out-of-the-box” thinking by working with the Honeywell Corporation on some energy saving audits. The recommendations Honeywell came back with will result over time in enough financial savings that will pay for those upgrades plus the roof and boiler.

What makes the deal even better is Wednesday night they signed the paperwork to issue some federally taxable zero interest QZAB (Qualified Zone Academy Bonds) for $2,965.384 to make those repairs.

At the meeting to make a presentation for the board was the district’s attorney Jeff Soles of Thrun and Associates and Eddie McLiney of McLiney and Company of Kansas City, Mo. who facilitated the sale of the QZAB bonds.

“We have been working on this QZAB kind of behind the scenes for months since you made your application,” said McLiney.

McLiney reported to the board how the deal came together, what the final terms of it included and what savings it would result to the district. This was the first time they had done a QZAB bond and it differed a great deal from past bond experiences.

“QZAB is a taxable bond issue and in your history you have always done tax exempt issues to this point,” said McLiney. “If you compare the interest rates between the two and if you would have done this as a tax exempt issue like the past, I estimate you would have done it at a 2.07 percent rate.”

McLiney said the total interest on a 1 to 15 year at 2.07 percent would have been $482,097. With QZAB bonds the actual interest rate would be 4.25 percent and that is the interest rate the district will be paying the bank, or $984,231.

However, under the QZAB plan, the Federal government pays the district that interest money in advance making it zero percent to the MAPS district.

“So, the federal government is paying the $984,000, and it nets out to a true zero interest rate to you,” said McLiney. “That is a savings to you of nearly a half a million dollars (the $482,097 the district would have paid without the QZAB bonds) to the local taxpayers.”

McLiney told the board that these bonds always sell well and what he likes to do is to work with local banks.

“Most of the local banks have never heard of the QZABs before and I contacted West Shore Bank here and although they had never heard of them, but their attitude was how can I buy some of these?” said McLiney. “They said we want these, and we are partners with this school so don’t go anywhere else.”

He said it took time, but the attitude of the bank never changed. They came back with a rate that will be at no cost to the district and it made his job easy.

Jeff Soles, who is the district’s bond counsel from the Thrun Law Firm informed them of the details.

“The resolution in front of you is to accept the bid of West Shore Bank, “said Soles. “The allocation you received was a little over $3.6 million, but we whittled that down, so that we were dealing with energy conservation improvements bonds. There were some other components that you wanted to do that weren’t energy related so we did have to size down the issue to $2,965,384.”

“This is a loan and you do have to re-pay the principal, but the beauty of it is you don’t have to pay any interest.”

On a roll call vote of the board, the resolution was approved by a 7-0 vote.

Superintendent John Chandler praised business manager Howard Vaas and maintenance supervisor Phil Roskoski for the countless hours they put in going over all the MAPS buildings and working with Honeywell to discover where savings could be found in the MAPS buildings. The scope of the work will entail lighting improvements, building management systems improvements, and HVAC improvements, and building envelope (insulation/weatherization) improvements.

“What this also means is this energy efficiency work, including the roof, will be done without any additional cost or tax to the taxpayers of this district,” said Chandler.

Vaas informed the board about what they will see in the upcoming months.

“Every building was touched, and we prioritized what we were doing to get the quickest payback,” said Vaas. “It would have been nice if we had been able to capture additional savings to give back to our instructional program, but in our case we had other capital needs that we had no way of funding (since the sinking millage failed) to pay for those improvements. The roof we are able to roll into this, and a boiler at Jefferson. The roof will cost $600,000 ($574,471 actual) and the boiler is $100,000 so those funds don’t have to come out of fund equity.

“We are paying for those with the savings from the energy conservation, so it is a great project from every standpoint.”

Vaas said the roof is not any different than what they initially proposed and it will have a 20-year warranty making it a good quality roof. He said the bidding process was very competitive, and that many roofing companies came to the program they held for giving out the specs, including several local companies. However, none of the local companies bid on the project.

The business manager said the energy projects will start in January because they want to capture the savings as soon as possible. The roof work is expected to start in late May and June when school is out for the summer.

Board members reviewed bids and accepted one from Bri-Car Roofing and Sheet Metal for the actual roofing and another from Clifford Buck Construction for some of the metal frame work to the support system.

 

 

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Posted by Ken Grabowski

Ken is News Advocate’s education reporter. He coordinates coverage for all Manistee County schools and West Shore Community College. He can be reached by phone at (231) 398-3125 or by email at kgrabowski@pioneergroup.com.

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