Morgan BOE ponders funding of new school
Morgan County Board of Education passed a resolution of intent to borrow $25 million for a new Priceville High School at a called meeting May 22.
The move was recommended by Attorney Heyward Hosch of the Birmingham law firm of Maynard Cooper & Gale PC.
Hosch explained that passage of the resolution authorizes his firm to proceed with the legal paperwork needed for the sale of a $25 million general obligation bond issue.
“This resolution is preliminary and non-binding,” he said. “We’ll bring back to the board a finance package for its consideration at a later day.”
He also pointed out that whatever the board decides with respect to how much it borrows, the length of the loan payback and its commitment of tax revenues will have to be approved by the State Board of Education.
“I will say, however, that the AA- rating you received from Standard & Poors was a wonderful result,” Hosch added. “You have a wonderful reputation throughout the state.”
John Godwin, chief financial officer, addressed the board about the impact the new school project would have on debt service, reserve fund and capital outlay funds.
He said a $25 million bond would increase the school system’s bonded indebtedness by about $900,000 a year, or $3.9 million in annual debt service. The payment would be lowered to $3.5 million in 2020.
He pointed out that the leveraging of funding from capital improvements ($500,000 a year) is projected to build up the school’s system’s reserve fund at the end of the current fiscal year. However, it has resulted in less money for capital improvements such as roof replacements.
Board chairwoman Carolyn Wallace questioned Hank Summerford, maintenance director, about the impact leveraged funding is having on capital outlay projects.
“Losing $500,000 is not such a big deal but if you take away $1 million we wouldn’t have money to do very much. We have one or two re-roofing projects to go. After that, it’s heating and air conditioning again.”
Board member Paul Holmes questioned Horch about borrowing more money than what is needed to build a new school.
“Say, we only need $15 million,” Holmes asked.
“You can say that but once you put the bonds on the market, that’ it.” Horch pointed out. The process is rather quick. You borrow it but you don’t have to spend it all.”
“At some point we’re going to have to decide and put down a stake,” said board member Jeff McLemore.” We need to put everything on the table and decide if we need to go forward.”
“We need as much information as possible before we decide,” Wallace said. We need to listen to all of our sources.”
$25 million doesn’t surprise me for a new high school,” Horch pointed out.
“I think he’s right,” said board member Billy Rhodes. “If it’s sound for us to move forward, I think we’re moving in the right direction.”