Idaho school districts could start receiving their proceeds from House Bill 521’s facilities bond next month. 

The Idaho State Building Authority (ISBA), the organization tasked with issuing the HB 521 facilities bonds, is close to finalizing the first sale in a series of bonds that will fund public school capital projects across the state, according to Wayne Meuleman, the authority’s executive director and general counsel. 

Idaho Education News recently spoke with Meuleman to learn more about the HB 521 bonds and the group that’s working behind the scenes to secure funding for needed school infrastructure upgrades. Meuleman has been an attorney for the building authority since 1975 and its executive director since 1980. 

Here’s what we found out:

Building authority tapped as $1 billion bond-issuer

After the Legislature enacted House Bill 521 this spring, the Idaho State Building Authority got to work organizing the sale of bonds that will support a grant fund for school facilities upgrades. 

The sweeping spending package invested $1.5 billion in state funds, including $1 billion for bonds backed by sales tax revenue. Each school district will get a share of the bond proceeds, which are divided through an attendance-based formula. 

HB 521 tapped ISBA as the bond-issuer. This means the group is responsible for setting bond maturity schedules, obtaining bond ratings and drafting lengthy statements explaining bond terms, among other tasks that advertise the sales and ensure they’re legally sound. 

“There’s a fair amount of paperwork in it,” Meuleman said.

This role isn’t new for the ISBA. The organization has played a little-known but key part in financing public infrastructure for decades. But HB 521 broke new ground for the organization in a few ways. 

Facilities bonds priciest ISBA enterprise to date

The Legislature in 1974 created the ISBA as an independent entity with the authority to help the state government secure funding for capital projects, like new buildings and remodels. 

ISBA has financed dozens of notable properties, including academic facilities on each of the state’s college and university campuses along with state government offices, hospitals and prisons. Here’s a handful of its projects: 

• The Pete T. Cenarussa Office Building in Boise (built in 1979).
• The Idaho State School for the Deaf and the Blind in Gooding (additions built in 1984).
• State prisons in Boise and Orofino (additions built from 1988 to 1998).
• State Hospital North, a psychiatric facility in Orofino (built in 1992).
• The State Capitol in Boise (remodeled in 2006).
• The Hewlett Packard campus in Boise (purchased in 2017).

According to state law, the building authority is an “independent public body corporate and politic,” the same distinction given to the Idaho Housing and Finance Association, which also issues bonds on behalf of the state and municipalities. ISBA isn’t a state agency, but it’s governed by a board of commissioners, appointed by the governor with the approval of the Senate.

ISBA previously hadn’t issued bonds for K-12 buildings, nor had it financed grant funds. And the $1 billion in bonds through HB 521 is its highest-value venture to date. By contrast, ISBA’s most valuable bond offering over the past decade — money raised for the Boise Hewlett  Packard campus — was worth less than $150 million.

Historically, the group’s work has been project-specific, Meuleman said, like issuing a bond to build a single building or buy a piece of land. Properties financed by ISBA are leased to the state government or to community college districts, and the government agencies are responsible for their maintenance, repair and the operation.

HB 521 added a provision to the Idaho State Building Authority Act — the law that created the entity — empowering it to issue bonds financing public school facilities. The legislation also directed the Idaho Department of Education to ensure school districts qualify for and receive the bond-funded grants.

In other words, ISBA is securing the money while the Department of Education is passing it on to districts.

“We’ve been working very closely with the department on that,” Meuleman said. “Our effort has been to time a bond issue so that as school districts become qualified the money will be available for those grants.”

Dual bonds account for sporadic facilities plans

ISBA is issuing two school facilities bonds. The first is worth $750 million and the second — planned for early next year — will be worth $250 million.

The dual bond offerings account for the sporadic timing of school districts becoming qualified for the grants. Districts are required to submit comprehensive facilities plans, laying out capital needs over the next decade, before they can receive their share of bond proceeds. And some are completing their plans more quickly than others.

“The school districts are moving quickly, and that’s why the first tranche is more than the second tranche,” Meuleman said. “The later bond issue will pick up everybody and true-up the overall distribution of grants.”

As of Sept. 10, the Department of Education had approved 44 school districts’ facilities plans, green-lighting grants totaling nearly $409 million.

ISBA is on pace to close a deal selling the initial bond to underwriters later this month, which means districts with approved plans could receive their money in October, Meuleman said.

ISBA opts for negotiated sale

For the initial, $750 million facilities bond, ISBA hired JP Morgan as the lead underwriter and BofA Securities as co-underwriter.

Underwriters have a significant financial stake in bond sales. They purchase the bonds directly from the issuer and resell them to other investors for a fee. This comes with profits — funded by the bond proceeds — but also risk if the bonds don’t sell.

“They’re the sales entity for the distribution of the bonds,” Meuleman said.

ISBA’s board of commissioners selected the facilities bond underwriters among six candidates that submitted written bids; three were selected for interviews with the board. While this process was competitive, it wasn’t a “competitive sale,” one of the two methods for selling bonds. Instead, ISBA opted for a “negotiated sale,” the process it has traditionally used. 

In competitive bond sales, the issuer sets the terms of the bond and any underwriter can bid to purchase it. The Government Finance Officers Association recommends competitive sales for bonds with strong credit ratings from well-known issuers, and research shows that competitive sales typically lead to lower interests costs for the borrower.

In negotiated sales, the issuer handpicks an underwriter. Then the issuer and underwriter negotiate the terms of the bond. The terms are usually designed to meet the needs of the underwriter’s clients.

The facilities bonds likely have features favoring a competitive sale. But ISBA chose a negotiated sale because it’s a “very large bond issue under a new program adopted by the Legislature in 2024,” Meuleman said.

“The authority uses a competitive selection process to identify experienced underwriters with expertise that fit the unique characteristics of program,” he said. “We believe the manner in which we are issuing bonds will produce the best result for the authority, the state and public school districts.”

Facilities bonds likely an attractive investment

While underwriters purchase the bonds and take on the burden of marketing them to investors, the state government is still responsible for paying off the debt.

Under HB 521, the state will pay principal and interest on the facilities bonds using sales tax revenue. Idaho taxes retail sales at 6%, collecting about $3.1 billion annually. Up to $125 million of that money will be diverted annually to a new fund, the school modernization facilities fund, to support the bond payments.

That’s a major expense for the state, particularly when it comes to taking on debt, but it’s not unprecedented. The Idaho Housing and Finance Association in recent years has issued three state bonds altogether worth nearly $1 billion for transportation infrastructure projects. The state spends $80 million in sales tax revenue each year on those bonds.

Still, Idaho has little debt compared to other U.S. states, and the facilities bonds are probably a safe bet. The Cato Institute, a conservative think tank, recently rated Idaho among the six lowest liability states, based on bond debt as well as unfunded pensions and other post-employment benefits.

The state also has a strong credit rating. Ratings agencies regularly give the state their highest marks for borrowers. And Moody’s Ratings labeled the HB 521 bonds “Aaa,” the agency’s top quality rating to signify low-risk investments.

And Idaho’s stature as an infrequent borrower will likely make the school facilities bonds attractive for investors, Meuleman said.

“They want to balance their investments so that they’re diversified.”