The Baylor School on Friday got $13 million in tax-exempt bonds from the city of Chattanooga to fund improvements and pay off old debt at the private school on the banks of the Tennessee River.
Baylor will spend $2 million of the bonds to refinance an existing SunTrust loan. It paid for work done in 2012 to the soccer field, physical plant and a new central heating, ventilation and cooling (HVAC) system for the library, Baylor spokeswoman Barbara Kennedy said via email.
The remaining $11 million is for work that is underway now, Kennedy said, and work done over the summer: $5 million for Lowrance Hall girls dormitory and Lupton Hall boys dormitory and $1.5 million for new HVAC in Hunter Hall, which is the main administration building and also serves as a girls dormitory on the second floor.
"The rest is for a new central plant and the addition of a new box for the kitchen essentially it's an empty shell for a new kitchen," Kennedy said.
The city won't spend any money on the deal.
A subsidiary of SunTrust Bank named STI Institutional and Government Inc., will buy the bonds, and The Baylor School will pay STI back the principal and interest. Baylor only has to pay the interest, not the principal, for the first 10 years of the 20-year bonds, said SunTrust First Vice President Mike Cooper, and the interest rate is set at 3.14 percent. After that, the school will repay the principal at $1.3 million a year for 1o years.
The city is involved because it's able to issue tax-exempt municipal bonds to educational institutions and other projects for the public good, such as $325 million in bonds it issued last year to expand Memorial Hospital.
"We like for these organizations to be able to do these projects," said William Bulls, chairman of the Health, Educational and Housing Facility Board, which voted Friday to issue bonds for Baylor. "They're good projects, because they stimulate growth in Chattanooga."
Baylor originally wanted the city to issue $13.5 million in bonds, but only needed $13 million, said Chuck Grice, a Nashville-based attorney who specializes in tax-exempt bonds and spoke on behalf of the school at the Friday meeting.
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