A Providence City Council committee has approved a resolution authorizing the city to issue up to $140 million in general obligation bonds to keep money flowing to ongoing school construction projects, according to the Providence Finance's published meeting recording of the special committee's Tuesday, July 14 meeting.
The committee, chaired by Sanchez, voted to approve the measure after hearing from the city's chief financial officer, who told members the borrowing had already been authorized by Providence voters in a November 2020 referendum. The $140 million is intended to cover the continued costs of what the city calls phase two of its school construction program, including work at Mount Pleasant High School and several other schools the officer said regularly come before the school building committee.
The bond issuance is contingent on the state agreeing to reimburse the city for at least 75% of eligible project costs through state housing aid, sometimes called the state share ratio. That threshold is set by the resolution itself: if the state's reimbursement rate at the time the bonds are issued falls below 75%, the city cannot proceed under this authorization as written. The financial officer also noted that the total authorized amount would be reduced by any grants the city separately receives in state bond proceeds from the Rhode Island Department of Education or the Rhode Island School Building Authority.
Committee members took up this item together with a separate, smaller bond measure — up to $26.5 million to be issued through the city's public building authority to fund projects in the current two-year capital improvement plan. The council's role here is procedural but consequential: this vote clears the school bond out of committee, but it still needs passage by the full city council, and the financial officer said the timing of that vote will directly affect when the money becomes available.
According to the officer's presentation, if the full council gives the bond single passage before its summer recess, the city could close on the $140 million bond around October 7. If the council does not act until after recess, the closing would be delayed by approximately six to seven weeks, time the officer said is needed for underwriting, credit rating calls, and other required steps before any bonds can be sold. He said the delay would not create a cash-flow problem for ongoing construction work, telling the committee the city has resources from prior bond issues to keep paying vendors in the meantime.
The presentation included financial projections from the city's outside fiscal advisor, Hilltop Securities. Those materials estimate the bond would generate a premium of roughly $11.78 million, bringing total proceeds to about $151 million, with roughly $139.18 million directed to the project fund and a capitalized interest fund. The capitalized interest fund is money set aside up front to cover interest payments — in this case for about three years — before the city's general fund needs to start covering debt service. The first interest payment would come due in November 2028, with the first principal payment due in May 2030 and final maturity in 2046, 20 years after closing. The officer estimated a true interest cost, a standard measure of a bond's total borrowing cost, of about 4.19%, which he said compares favorably to the 4.35% rate the city secured on a property acquisition bond it closed last month.
A committee member asked what the city's total debt service would be with the new borrowing added; the officer said the amount is within the city's legal and fiscal capacity but that he did not have the specific figure on hand and agreed to provide it in writing. Another member asked whether seven weeks of delay carried any risk of higher interest rates; the officer said global market conditions make rates impossible to predict with certainty, but that current market signals suggest the city would likely still be borrowing in the "low fours" percentage range absent a major economic disruption.
The committee approved both the $140 million school bond and the $26.5 million public building authority bond by voice vote, sending both measures to the full city council. The next step is a vote by the full council; the financial officer indicated the city hopes for passage before the council's summer recess in order to keep the projected October closing date on track.