More school bonds on the horizon
September 13, 2012
Eyeing current market conditions, Douglas County school board members are planning to issue another $22.5 million in bonds to fund mass renovation of Douglas High School and potentially other projects in their master plan.
On Tuesday, bond advisor Marty Johnson of JNA Consulting Group told board members that the district has issued three bonds totaling $20.6 million to date, as well as about $2.3 million in pay-as-you-go funding from excess tax revenue.
Johnson said that by using Build America Bonds and Qualified School Construction Bonds, the district has saved more than $2 million in interest.
Thus far, the continuation bond approved by voters in 2008 has funded large-scale renovations of Pinon Hills and Gardnerville elementary schools, replacement of fire alarms at Douglas and Whittell high schools, replacement of boilers at seven different sites, replacement of fan coils at three sites, and the rekeying of classrooms district-wide, among other items.
That continuation bond didn’t raise property taxes but rather preserved a 10-cent tax rate to fund the district’s debt service – a rate that otherwise would have been used by another county entity. Per voter authorization, the district can issue bonds until 2018 as long as there’s enough revenue through the tax rate to repay those bonds. Extra tax revenue not used for principal and interest payments is rolled over into the aforementioned pay-as-you-go account and also applied toward projects.
Looking forward, the remodel of Douglas High School, to accommodate ninth-graders in 2015, is the big ticket item left in the district’s 10-year facilities master plan. The project is expected to cost $17.5 million. Other projects on the list include capital improvements at Meneley, Jacks Valley and Scarselli elementary schools and Whittell High School. Those projects would total about $12 million, according to the facilities master plan.
Johnson said he expects 1 percent average growth in Douglas County tax revenue over the next five years.
With a 20-year bond term, he said, the district could issue $17.5 million in bonds, primarily for the high school, and could expect about $2 million in pay-as-you-go funding, totaling $19.5 million.
With a 30-year bond term, he said, the district could issue about $17.5 million in bonds now, another $5 million before 2018, and could expect about $2.5 million in pay-as-you-go funding, totaling $25 million.
“With the 30-year bond, you do have more debt service ($4.3 million), no doubt about it, because you’re paying it off over a longer period of time,” Johnson said. “With the 20-year option, you still have a substantial amount of money to work with, but you lose that future flexibility.”
School board members generally agreed that the 30-year term would be beneficial.
“I’m assuming 1 percent growth is conservative,” said trustee Ross Chichester. “We need to budget more conservatively even if we have a windfall and a little more goes into pay-as-you-go.”
Johnson said interest rates right now are extremely attractive. He gave the example of a 2.5 percent rate on a 15-year bond issued by Lincoln County School District.
He said if trustees were so willing, they could split up bond issuances, with one this year and one at a later date, in order to achieve a “bank qualified” designation. That designation only applies to issuances under $10 million, hence the split, but it could save the district $500,000 in interest, with half that available as pay-as-you-go funding.
“The approval of the Debt Management Commission is good for 36 months, which provides plenty of time to issue the remainder without having to repeat that step,” Johnson wrote in his report to the board. “There would be additional issuance costs by phasing the bonds, but we estimate that amount be $60,000-$75,000, which is far less than the $250,000 of additional capital funding that could be generated.”
Board members favored the pursuit of lower interest rates, and they directed District Chief Financial Officer Holly Luna to prepare the necessary bond resolutions. They also instructed staff to solicit feedback from the Keep Improving Douglas Schools Committee, which spearheaded the bond campaign in 2008.
n In other news, school board members continued an agenda item regarding student representation on the board.
Trustee Teri Jamin and Superintendent Lisa Noonan reported that those leadership students approached about the idea preferred student pairs serve on the board rather than individuals.
“The idea is proactive input, not reactive,” said Jamin. “It would count towards credit in leadership class for attending board meetings.”
Jamin said the school board would provide guidelines in the future, if so inclined, such as whether students would sit at the table with other trustees or in the audience.
Under state law, student representatives could not be voting members of the board. They would serve in an advisory capacity.