Once the school district makes a decision to raise capital by means of bonding, it must next consider which method of finding a “lender” or buyer of the bonds works best. Illinois school districts have flexibility as to the method of sale.
A competitive sale of school district bonds is not required. The method by which to attract potential investors of bonds can be a critical component to the resulting interest rate the school district will pay to service its bonds. A credit rating is not legally required to be obtained by the school district in order to issue bonds. However, a credit rating may help lower interest costs, particularly in the case of public bond issuances. The following parts of this section discuss different forms of offering bonds to investors or “lenders” that are typically used.
Negotiated sale. In a negotiated sale, the process begins with the issuer choosing an underwriter (or managing underwriter if more than one underwriter). The issuer and the underwriter then negotiate the terms of the offering. Once terms of the offering and assuming all procedural issuance requirements are met by the issuer, the underwriter will buy the bonds from the issuer and remarket the bonds to its investors accordingly.