The Palmerton Area School District is looking to the bond market in order to finance upcoming construction projects and refinance a current debt.

Zachary Williard, a senior management consultant at Public Financial Management Inc. of Philadelphia, said, "This is a very traditional way for municipalities and school districts to fund projects."The district is looking at a $21 million districtwide renovation project. The project would establish a cafeteria for the junior high school; a multipurpose turf field; would install chillers and replace unit vent heaters at the high school, Towamensing Elementary School and S.S. Palmer Elementary; and safety and security improvements districtwide.Williard said when an entity, in this case the school district, needs to fund a project, it goes out into the public bond market to find investors who are interested in purchasing the bond.The investor lends the money for the project to the school district at a fixed interest rate for a fixed number of years. The investor can be an individual, retailer or mutual fund or pension fund group.At a recent school board workshop, Williard presented two scenarios for pursuing a bond.Scenario 1 was to take out a bond for 30 years. Scenario 2 was to have the bond for 20 years. The school board preferred the second scenario.The school board also specified that it wants to have a savings of 4 percent.Williard said this can be difficult, but he would try. What this means is that the school board wants the bond to have a low enough interest rate to allow them to save 4 percent on the loan at the end of its 20-year term.Williard said that a 1 percent savings roughly equals $100,000, so a 4 percent savings would be about $400,000.The projectWith this first bond, the financing would pay for the installation of air conditioning in all of the schools, upgrading security and refinancing the existing debt.Nothing was mentioned about other projects, such as the middle school cafeteria or stadium renovations.There would be a series of bonds taken, but this first one would be about $15 million, Superintendent Scott Engler said. On a $15 million bond, 1 percent is $150,000, so 4 percent would be a savings of $600,000.Williard said interest rates exist in a wide range for bonds and change daily. For this reason, he suggested to the board that if they approve pursuing the bond, that they grant him the ability to accept an investor when one comes available and not have to return to the board for approval.At the school board workshop, the members voted to allow PFM to draw up some plans using the 20-year bond option.A representative from the company will be in Palmerton Tuesday and will go over the specifics with the school board, Williard said.If the school board likes what they hear, then "There will be a motion on Tuesday giving them the OK to progress," Engler said.When the school district started planning for the upcoming projects, officials anticipated having $6 million to put down, he said.Between the amount saved for the project and the amount of the bond, the total project cost and refinancing would total about $21 million.The timelineDuring the meeting earlier this month, Engler asked Jens Damgaard, a municipal finance attorney with Rhoads & Sinon in Harrisburg, to clarify the time requirements for pursuing bonds."When we talk about that third bond issuing, that doesn't have to be in 2016, but can be later," Engler asked.Damgaard confirmed that if a third bond is pursued, it could be issued after 2016.School board member Susan Debski had several questions for Williard and Damgaard. Among them were whether or not the bond would be zero mills or not.Damgaard answered that the first bond taken by the school district was in 2006. It was refinanced in 2010. He told her that the board has to take into consideration that "interest rates get higher the longer you stretch out the loan. It might be less in cost, but higher in mils."For this reason, Debski said she would prefer that the district take on a heavier load early on and a lighter load later. From this, the board decided to go with the 4 percent savings."Are we committed to an increase in millage to support this?" Debski asked the other board members.School board member Tammy Recker responded, "No, I'm not committed to that at all.""Once we deplete the fund balance will we replace it?" Debski asked.Engler stepped in and said, "The quick answer is that we would not need to deplete that account. It's prudent to have some money saved."The Palmerton Area School Board will meet at 6:30 p.m. Tuesday at the central administration office, 680 Fourth St., Palmerton.