Hempfield Area mulling when to float new bond with financial markets in flux

Hempfield Area School Board members are working closely with banking officials as they prepare to start a multimillion-dollar high school renovation project next year.

School directors met with PNC bankers this week to discuss the current state of the market and the possibility of issuing a second bond near the end of the project, something that was first discussed in April when the board moved forward with a bond that would cover $110 million. The extra money would be used to cover additional fees and costs from other projects.

“We always knew that we were going to need some kind of further funding toward the end of the project to finish it off,” school Director Jerry Radebaugh said. “That is not only because it was $110 million for the school, but then we also had the asset protection, as well. So, we knew that we would have to take out another small amount, not knowing what that was until the project was nearing completion.”

Given the state of the market — with rising consumer prices and the Federal Reserve hiking interest rates to combat inflation — board members wanted open communication on when would be the best time to issue the second bond.

Related:

• Hempfield Area officials get look at high school renovation plans

• Hempfield moves forward with borrowing plan for school construction

• Hempfield School Board decides to tear down existing high school to its bare bones, building up from there

“We just want to make sure we’re doing it at the right time,” Radebaugh said. “We wanted to communicate with them in the right manner that we are looking at close to the end of the project, but if any time between now and then presents itself to be a good opportunity to please communicate with us and let us know that.”

School directors in March voted to move forward with the project, which will involve gutting the high school to its structural system and rebuilding everything.

It is estimated to cost between $97 million and $110 million. Bids will go out in April. Officials are planning to break ground in June.

Board members also are considering projects at other school buildings. They voted last month to move forward with the first phase of those projects, which will focus on heating and air conditioning systems at Maxwell, West Hempfield and West Point elementary schools, as well as West Hempfield Middle School. That phase is estimated to cost $3.4 million.

“The information that I have in front of me is that the $110 million that you have sitting, according to your current breakdown schedule, will still be OK until April of 2025,” said Alisha Henry, managing director at PNC. “I do understand this could alter based on how bids come in. So if the project came in a little higher, maybe this would be spent more aggressively.”

She noted the issue will need to be readdressed at every point along the project. They agreed to revisit the conversation once bids are opened.

“I can by no means guarantee you in 18 months rates are going to be lower, but the law of economics is you push inflation until it stops, and then, once the government has raised rates to a point where no one can afford to do anything, everything sort of falls apart and they have to lower them again,” Henry said.

School Director Mike Alfery noted, “When we started all of this, we kind of knew … we did the $110 (million) knowing it wasn’t going to be enough. I think we all agreed that the second bond would need to go out somewhere mid-24, early 25. So that sounds like we’re in a better position than most.”

Radebaugh agreed.

“We’re good to go,” he said. “It’s not like we’re scrambling to get another bond because we don’t have funding for the project. It has always been the plan to pull out whatever we needed at the end to finish the project.”