CHICAGO -- The Detroit Public Schools have solicited proposals from about 15 firms to lead the first series of bonds to be sold under a $1.5 billion bond authorization approved by voters this month.
According to the school district's plan, 10 series of general obligation bonds will be issued over the next 15 years. The proceeds will be used to pay for capital improvements to 146 crumbling school buildings around the city and to finance construction of 14 new buildings.
The bonds will be repaid with revenue generated by property tax increases to take effect over the next 45 years.
Voters approved the bond issue by a wide margin Nov. 8 despite opposition from the Detroit business community, local newspapers, the Detroit Federation of Teachers, and the AFLCIO. Critics said the bond scheme was too expensive and too vague.
But school officials are taking their mandate and running with it. Requests for proposals to manage the first issue were sent to firms last week, according to the school district's financial adviser, Richard Barch of Stauder, Barch & Associates Inc.
Barch said school officials hope to take the first issue, for about $90 million, to market by February. Responses to the request for proposals are due Friday.
Though several woman- and minority-owned firms were on the list to receive the district's request for proposals, Barch denied the school district is shying away from mainstream investment bankers.
He said the school district solicited requests from Kemper Securities Inc., A.G. Edwards & Sons Inc., Grigsby Brandford & Co., and "a cross-section of potential people interested in the bond issue."
Barch said before the election that minority-owned Grigsby Brandford had already been selected to run the books for the first series of bonds. But school officials contradicted him and promised that requests for proposals would be issued before any decisions are made.
Barch stressed that whoever is tapped as senior manager for the first issue is not guaranteed a role in subsequent issues. "There will be additional requests for other issues," he said.
The current request provides some details not released during the pre-election debate. According to the request, a total of $650 million of bonds will be issued in the first five years of the program. The remaining $850 million will be issued over the following 10 years, with the final series completed in 2009.
School officials will ask Michigan to qualify each of the 10 bond issues for participation in the State School Bond Loan Fund. Standard & Poor's Corp. and Moody's Investors Service rate bonds qualified for the fund AA and A1, respectively.
State Treasurer Doug Roberts has already given preliminary approval for qualification, but has raised questions about the schools' ability to raise money for debt service down the road without exceeding the state cap on property taxes.
Though the district says it intends to issue the bonds as fixed-rate obligations, officials have asked those submitting proposals to describe alternative structures that could save the district money if the market fluctuates significantly.