The school district in Oakland, California, issued $266.9 million in bonds to finance capital improvements.
The school district sold the bonds in four series. The tax-exempt bonds, consisting of $249.5 million, mature between 2026 and 2048, yielding between 3.27% and 4.48%. The federally taxable bonds, consisting of $17.4 million, mature between 2024 and 2035, yielding between 5.7% and 6.05%. The securities received an insured rating of AA from S&P Global Ratings and an underlying rating of A1 from Moody’s Investors Service.
The rating “reflects California school district GO bond security features that include the physical separation through a ‘lockbox’ for pledged property tax collections and a security interest created by statute,” Moody’s analysts wrote, referring to general obligation bonds.
Inflation and ensuing increases in construction costs led school district officials to the bond market sooner than expected. The school district’s board authorized a $65 million increase in planned spending in June, to be financed by bonds approved by district voters in 2020.
That year, a study by the school district identified $3.4 billion in necessary upgrades, and Oakland voters approved $735 million in bonds to make a series of improvements to district schools. But with still-high inflation now spurring a surge in labor and materials costs, Oakland’s public schools may get less out of the authorization than they anticipated.
Construction costs have increased by 28% in the past two years, Kenya Chatman, the school district’s executive facilities director, said in June. The district predicts an additional 8% to 10% annual escalation in construction costs.
The bonds are general obligations of the school district, secured by property taxes.
Siebert Williams Shank & Co, LLC served as lead underwriter on the issuance, purchasing the bonds for $288.5 million. The price reflected a premium of $22 million.