Printer Friendly

Building bonds.

Building Bonds

Up To $300 Million In Construction Bonds For Arkansas Colleges Are On Their Way

Banks and brokers began selling an authorized $22.5 million worth of State of Arkansas College Savings Bonds on March 13.

By noon on March 15, orders were cut off. Arkansans already had requested $45 million worth of tax-free, zero-coupon and current interest bonds. Big ads that touted the bonds were scheduled to run in Sunday's paper, but were cancelled. No need.

"We wrote orders as fast as we could," says Jane Saunders, a vice president with Dean Witter Reynolds in Little Rock and the spark behind the explosion.

In July, Saunders will do it all over again when Dean Witter brings to market a second bond issue.

A Rolodex the size of a tire sits on her desk, but she says brokers, herself included, didn't have time to call customers with a sales pitch -- the customers called them.

Bringing the AA-rated bonds to market was a long but rewarding process for Saunders, who got the idea after reading about a similar program Dean Witter was involved with in Illinois. Most Arkansans don't realize the bonds were the initiative of Saunders, not the Legislature or any state agency responsible for the bonds.

Investors who missed out in March will have two more opportunities this year to purchase the bonds the second issue in the summer and a probable third issue in the fall.

Who, What, Why?

The bonds serve the dual purpose of funding capital improvements at the state's colleges and universities while enabling an investor to save for a child's education or his or her own retirement.

For example, if a parent purchased a bond paying 6.5 percent, he or she would pay $278 today and have $1,000 to put toward the child's education 20 years from now.

Or one could purchase the same bond and cash it in 20 years from now and take a trip or buy a retirement home.

The interest earned is exempt from state and federal taxes, and the proceeds are put to immediate use at state higher education institutions.

Proponents estimate the bond issues will move up many improvements at the schools by at least 10 years.

Bringing The Bonds To Market

After Saunders read about the Illinois issue, she called Dean Witter Reynolds' public finance department and began asking questions. She talked to people in Atlanta, Dallas and New York. Then she called Gov. Bill Clinton's office.

The governor's office put her in touch with the Arkansas Department of Education and the Higher Education Committee. An interested group put together a proposal and wrote a bill to present to the Legislature in January 1989.

In these early stages, Saunders heard a lot of "you're never going to pull that off" and "how are you every going to get that through the Legislature?"

"Well, one person doesn't," she says. "I applaud the Legislature for doing this, and can't say enough good things about the people involved." She specifically mentions Bob Nash and Kay Bell at Arkansas Development Finance Authority and Diane Gilleland at the state Board of Higher Education.

"Everybody wanted to do this for Arkansas."

When the bill passed, the Legislature put Act 683, which gave the state the authority to issue the general obligation bonds, on the November 1990 ballot. Saunders says she remembers only one other state GO bond in her lifetime.

A committee was formed to publicize the act. Its goal was to speak before every civic club in the state. While Saunders is not sure that was accomplished, she does say that at least one presentation was made in every county.

Proponents of Act 683 were rewarded when it passed in the general election "in wonderful fashion. There was no doubt the people of Arkansas were for this," says Saunders.

But the work was not done. A group then began to work on the technicalities of the issue.

"It takes longer than you can imagine," she says.

Spending The Dollars

Before the bonds even were approved by the electorate, the state Board of Higher Education had prioritized the state's needs for the proceeds at an August 1990 meeting. The board created four categories of expenditures.

The first category, Library Volumes and Equipment Holdings, was funded by the March 1991 issue. Later bond issues will fund major maintenance on state campuses as well as renovation and new construction.

A requisition and invoicing procedure has been established, and invoices for purchases in the first category are just starting to come in, says Barbara Anderson, associate director of institutional finance at the state board.

A total of $300 million in bonds eventually can be issued, but the Legislature has allocated enough money now to fund only the first $100 million. The state board estimates that $93 million will be realized.

The second bond issue, originally scheduled for August, will probably be held in July, says Anderson. A $56-million offering was planned, but it now looks like it will be less.

The size and timing of the issues are determined by the status of the projects. The state doesn't want to borrow the money before a recipient is ready to spend it.

"It depends on where they [the institutions] are in the planning stages," says Anderson. There even may be a third issue before the end of the year.

Some of the upcoming projects include:

* a $9-million library addition at Arkansas State University at Jonesboro;

* a $7-million academic complex at the University of Central Arkansas at Conway;

* a $7.5-million chemistry building at the University of Arkansas at Fayetteville.

UA-Fayetteville has asked for different improvements to its chemistry building since the 1970s. The bond issue will allow projects like this finally to materialize.

Also scheduled are a business school building at the University of Arkansas at Pine Bluff and a $7-million science complex at the University of Arkansas at Little Rock.

"Our institutions benefit, and the bondholders benefit. It's a win-win situation," says Saunders.

She is especially pleased that all of the orders filled in March were for Arkansas investors. And 50 percent of the orders were for less than $10,000, which indicates the average investor -- not institutions -- were buying.

By the way, Saunders is a new grandmother, and yes, she bought one of the bonds for 8-month-old Harry Patrick.

PHOTO : BEARER OF THE BONDS: Jane Saunders, a vice president with Dean Witter Reynolds Inc., initiated the successful State of Arkansas College Savings Bond program.
COPYRIGHT 1991 Journal Publishing, Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:State of Arkansas College Savings Bond program
Author:Ford, Kelly
Publication:Arkansas Business
Date:May 13, 1991
Previous Article:Cash crunch, divorce court and heart surgery.
Next Article:Wounded workers' comp.

Related Articles
Weathering the storm: despite recessions, Arkansas construction will see 3 percent gain this year.
Gone in a flash.
Bond program boosts higher ed.
Arkansas college saving bonds: not just for kids.
State Unveils Plan For College Savings.
Arkansas Business List: largest broker dealers. (Brokerage Firms).
Financing from the ground up.
Alltel's multiple billion-dollar deals top list.
For the college bonds.

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters