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Chambersburg Area School District alters borrowing plans

November 14, 2008|By DON AINES

CHAMBERSBURG, Pa. -- The market crash that began in September forced the Chambersburg Area School District to postpone plans to borrow about $46 million needed to complete funding the high school expansion and construction of Benjamin Chambers Elementary School.

Rather than swallow that much debt in one gulp, the district is breaking down the borrowing into two or three bites over the next couple of years, starting with the school board's approval this week to the issuance of $10 million in bonds.

"In September, the market virtually collapsed ... no issues were able to be sold into the market," Greg McClanahan, a financial adviser with the Public Financial Management (PFM) Group, told the board Wednesday.

The situation since has recovered enough that McClanahan was able to recommend the board approve issuing the $10 million in bonds at an interest rate in the range of 4.5 percent to 5.5 percent, he said.

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The board could approve an additional $26 million in bonds next summer, followed by $10 million more at a later date, McClanahan said. Doing so spreads out the risk to the district and allows it to borrow additional funds as financial markets stabilize, he said.

Although breaking up the borrowing incurs additional transaction costs, McClanahan estimated the district also could reduce its borrowing costs by $1.2 million over the life of the bonds. There will be a bond sale before the end of the year and the bids will be presented to the board for approval.

Benjamin Chambers is scheduled to open in December. The $74 million Chambersburg Area Senior High School project is expected to be completed in about three years.

"By planning for the future (the district) intends to stabilize the tax increases for construction to 1.9 mills a year for the next five years," Jason Brockman of PFM said in a statement issued by the district.

Before Pennsylvania's Act 1 property tax relief law went into effect, the board voted to incur debt up to $116 million to finance its school construction plan.

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