ROBERT PIERCE
• Leader & Times
In October 2024, the Seward County Commission adopted a resolution authorizing the issuance of general obligation (GO) bonds in the amount of $6.1 million to pay the cost or port of the cost of road improvements.
The resolution was published, and the protest period began. That protest period ended Dec. 23, 2024, with no protests, and Monday, commissioners unanimously passed another resolution authorizing for the sale of GO Bonds Series 2025 of Seward County.
Bret Shogren, director of Stifel Nicolaus & Company, the financial advisor on the bonds, said with the approval of Monday’s resolution, drafting of the preliminary official statement, also called the offering document, has now started.
“We’re going to submit the issue to S&P Global for an underlying credit rating, a credit score for the county,” he said. “They have already scheduled a conference call with us and your administration to get some additional information on the local economy – economic development counties, finances, etc., and they’ll eventually assign a credit rating to the county.”
Shogren said county bonds were rated in 2021 when bonds were refinanced for Southwest Medical Center.
“The county received a AA-minus rating,” he said. “We expect to receive the same rating hopefully for this issue approximately two weeks before the sale. We’ll submit the documents and your last three years of audits to a list of potential bidders, and we’ll make your local banks aware of the issue. We’ll also advertise the sale in the Kansas Register, in the local newspaper.”
Shogren said the bidding process will open on a parody Web site, which he said is where most bidders submit their offer.
“Bidders can also e-mail their bid to me, or in very rare cases, they can fax or even hand deliver their bid to the county offices,” he said.
Shogren said bidders usually consist of underwriting firms such as his.
“If they’re the winner, we’ll market the bonds to investors,” he said. “On that date, we will evaluate the bids, and at the commission meeting that evening, we will recommend the county commission award the bonds to the firm providing the lowest true interest cost to the county. We’ll also attend that meeting that evening to explain the sale of the result or the results of the sale.”
Shogren said if everything goes as scheduled, the bonds would close Feb. 26.
“On that date, the winning underwriter will wire the approximately $6 million of bond proceeds to the county to pay for the project,” he said.
Shogren said the bond sale resolution was drafted by the county’s bond counsel, Gilmore & Bell, and authorizes and formally schedules the sale of the bonds and authorizes any other actions required to put the bonds out for bid.
The projects paid for with the bond money would include:
• Road R – U.S. Highway 54 to U.S. Highway 160;
• Meade Lake Road – Hwy. 54 to Meade County line;
• V Road – Meade Lake Road to Hwy. 54;
• Road 16 – T Road to Kismet Main Street;
• Kismet Main Street – Hwy. 54 to Road 16;
• Road J – Road I to Kansas Highway 190; and
• Larabee Road – Oklahoma stateline to Hwy. 160
Commissioner Steve Helm asked with the bonds being sold at a market interest rate, would they be sold at a premium interest rate generate more money? Shogren said they could be sold at a premium.
“The bidding process allows the bonds to be sold at the cheapest cost at the time of the sale,” Shogren said. “Recently, bidders have bid premiums on the bonds, and that’s where the coupon is sold – a little bit higher than the yield on the bonds – and it generates a little bit of premium. The premium is like cash to the county. They can use it towards their project, and we will downsize the issue and issue fewer bonds to offset that premium.”
With the bond issue, Shogren said the county cannot issue or sell more than $6.105 million either at premium or with interest.
“The county’s net proceeds from the bond will be about $6.1 million,” he said. ‘You can keep a little bit of premium as a contingency if you’d like. If you want to sell no more than $6.105 million, we will be instructed by you to downsize the issue and only collect approximately $6,105,000.”
Shogren said attorneys will typically allow entities to keep about 10 percent of the money from bond sales, and some issuers do this as a cost contingency.
“You are paying a little higher interest rate because of that premium generated,” he said. “The coupons are a little higher. As your financial advisor, we’d recommend you reduce the size of the issue by that premium as much as you can to be able to still pay the cost.”
Shogren said the size of the bond issue can be reduced to get the county’s gross proceeds number as close to $6.105 million as possible.
Administrator April Warden said the total cost of the road projects would be about $6 million, and the extra $105,000 would be used to cover services and fees.
“The extra $105,000 is cost of issuance, basically closing costs of the issue, and they’re probably a little bit less than that,” Shogren said. “I’ve overestimated a little bit just in case there’s something unaccounted for.”
Warden said other fees such as a credit rating fee are also involved.
“There’s a fee from S&P Global for the underlying credit rating, bond counsel to issue the legal opinion of the bonds, our financial advisory fee, bond printing numbers to assign identification numbers for the bonds,” Shogren said. “The attorney general’s office charges a fee to examine and approve the transcript. The state treasurer’s office taxed as paying agent. They charge a fee to be the paying agent on the bonds.”
Helm explained payments on the bonds would about three mills for 10 years, and he asked if those payments would be made from the Road and Bridge Special Highway Fund. Commission Chairman Scott Carr said with or without the passage of the half percent sales tax, the money would come from that fund.
Commissioner C.J. Wettstein estimated the sales tax would bring in about $2 million a year, and payments on the bond would be about $750,000.
Shogren said investors on these types of bonds do require some call protection.
“There’ll be a call date on the bonds,” he said. “We’ve typically seen about a seven or eight-year call on the bonds, which means you can’t repay them for seven or eight years.”
Shogren estimated a call date of Aug. 1, 2032, on the bonds.
“You’ve got about three years in advance. You could pay it off,” he said. “We could do a little bit sooner, but the sooner you do, the higher the interest rate is, the less premium that’s generated on the issue. If you do a shorter call protect, we’d recommend an eight-year call, but we can adjust that as well.”
Wettstein said if the sales tax is approved by voters, this could give the county extra money and early start on some of the road project. Warden said current plans call for the county to do 10 miles of overlay work each year.
“Where your sales tax was going to come into hand was to keep up with your 10 miles a year,” she said.
Shogren said once the call date has been hit, no penalty will be given for prepayment of the call for bonds.
