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Will a Non-Qualified Bond Work Better for My School District?

Michigan School Board of Education (BOE) members have lots of decisions to make in regard to Bond Programs for school improvements. One of them being how to sell the Bonds.

Whether they choose Qualified, Non-Qualified, or a Sinking Fund, each have specific advantages depending on what the School District is trying to accomplish. Those School Districts that have a good credit rating (i.e. solid financial record, good enrollment numbers or out-of-formula, healthy taxable property values) benefit from having more freedom to make a choice of their funding source including the Non-Qualified Bonding option. This option comes with its own benefits, including, the opportunity to skip the State Treasury process and the additional paperwork and required application that is involved.

With good credit, the District doesn’t have to rely on the State to co-sign for the bond and provides some more flexibility in the expenditure of funds. Also, they aren’t bound to the time it takes to provide the paperwork and be ready far in advance for the Treasury dates before their chosen election date. The qualified application process takes a minimum of six to twelve months vs. the non-qualified timeline, which can be processed in the three to four months if the scope of work is readily defined. Schools will still need time to carry-out their campaign activities to build support to pass the bond, but it frees up some time to do this at their own pace and choose which of the three election periods they’d prefer to choose, either May, August or November. When considering the preliminary design and estimating activities to pull a program together, this can be a large benefit. Additionally, through a Non-Qualified Bond Program, School Districts have the opportunity to shop for their own lender (either competitive or negotiated sale) and get a better interest rate, so they can do more with the monies their bond program generates.

How does a School District develop a Non-Qualified Bond Program? The Superintendent and building committee will still work with their Architect, Construction Manager, Financial Advisor, and Legal Counsel to establish their program, prioritize projects, determine a cost for improvements and create the bond language. The Board of Education will be able to shop for the best interest rate and financing for the Bond. The BOE will also set the duration of the bond and the tax rate to repay the loan.

Whether you choose Qualified, Non-Qualified, or Sinking Fund financing, Wolgast will assist you with free pre-bond services and bond campaign development to help bring the project to fruition. We will help you analyze the choices to develop the best strategic plan to meet your facility needs to benefit your students. Developing a solid, long-term master plan yields solid results. If you're a Michigan School District that has questions about your financing options, please call us at 800-WOLGAST.

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