Montclair taxpayers will pay $5 million less than expected for the first phase of the school district's $187.7 million project to repair and upgrade the schools, district officials said Monday.

The district projected an annual interest rate of 4.2% for its first bond issue for the project, totaling $70 million. The sale was awarded earlier this month to global investment bank RBC Capital Market at a rate of 3.52%. 

Under the originally projected interest rates, owners of an average assessed home in Montclair, at $628,952, would have owed $258 a year for the first two years of the bond. But with the bond sold at the lower rate, the same homeowners will only owe $199 for the first year and $209 for the second year, saving $108 in the first two years. The district has not yet explained why the cost will increase $10 from the first year to the second.

The Jan. 18 bond sale took place virtually, allowing for bids from across the country. All potential bidders were required to submit a good-faith deposit of $1.4 million to participate in the sale. Ten bidders submitted the deposit, but only eight submitted bids. 

RBC Capital Market’s winning bid was 3.519668%, though its offer was closely followed by the second-lowest bidder, J.P. Morgan Securities LLC, offering a rate of 3.519825%.

This was the first of three bond issues anticipated by the district. In 2025, the district plans for an issue of $60 million, followed by a final issue of $57.7 million in 2027. Each will be set for a 20-year issue, with the final issue set to expire in 2047. The district projects a 4.5% annual interest rate for the issues in 2025 and 2027.

Assuming the second and third bond sales do sell at the projected 4.5% rate, the cost for the average homeowner in Montclair over the 24-year course of repaying the bonds is expected to be $714 per year, not the originally anticipated $732.

Before selling the bonds, the district received a credit rating of AA- from Standard & Poor’s Global Rating Services, a rating classified as a high grade with low risk, Christina Hunt, business administrator and board secretary, said at the Monday, Jan. 23, Board of Education meeting.

However, over the next two years that rating could increase or decrease, Hunt said. If a trend emerges of the district running deficits or if the district's reserves decrease, there could be a “negative rating action,” she said. 

The Montclair school district received a rating of AA- from Standard & Poor’s Global Rating Services, a rating classified as a high grade with low risk, Christina Hunt, business administrator and board secretary, said at the Monday, Jan. 23 Montclair Board of Education meeting. (COURTESY MONTCLAIR SCHOOL DISTRICT)
The Montclair school district received a rating of AA- from Standard & Poor’s Global Rating Services, a rating classified as a high grade with low risk, Christina Hunt, business administrator and board secretary, said at the Monday, Jan. 23 Montclair Board of Education meeting. (COURTESY MONTCLAIR SCHOOL DISTRICT)
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A “positive rating action” likely won’t happen, as the district has a substantial amount of upcoming debt and capital spending, Hunt said. But if the district manages to grow its reserves, a positive action is possible, she said. 

“We have to be fiscally responsible and pay attention to our reserves to stay at or improve our credit rating with S&P,” Hunt said.

The bond sale closing is scheduled for Feb. 1, and once it is finalized, the board will receive the $70 million from the sale. 

Seeking a credit rating and selling the first bond issue are just two of the many bond referendum tasks that district leaders have tackled since the Nov. 8 election, Hunt said.

The district put out a request for proposals for construction management services, a key component to the project’s success, district leaders say. The district received bids from four construction management firms — Colliers, Epic, Gilbane and Legacy — and has narrowed the selection down to two, according to the minutes from the Jan. 17 facilities committee meeting. The two firms have not been identified by the district. Parette Somjen Architects, the district’s architecture firm, has “worked well” with the two construction management firms on other projects, the minutes say. 

This week, district administrators will visit current projects of the construction management companies vying for the district’s contract and will finalize background checks and references for the companies. The facilities committee will meet Jan. 31 to discuss the construction management firm recommendation, and on Feb. 1 the board plans to award the management contract. 

The board has appointed an advisory committee to help select the construction management service, and plans to name a community advisory committee at its Feb. 1 meeting. The group will be consulted on various aspects of the work and is scheduled to meet for the first time on Feb. 9. 

District administrators have also been working with interim Athletic Director Rob Anello, Montclair High School Principal Jeffrey Freeman and coaches to discuss the Woodman Field project and what it will mean for sports teams. 

Woodman Field is slated to get a new grandstand and undergo soil abatement, along with new turf installation. 

A schedule for the referendum projects has not yet been set, though district leaders have said any projects involving safety will be given the highest priority.