The Brown County Schools Board of Trustees is planning to take out nearly $6 million in bonds to do capital projects at Brown County High School, including fixing the heating and cooling systems.
On May 20, the school board had a work session with legal representatives from Ice Miller, financial advisors from Baker Tilley, and Steve Thoman with design build construction company Performance Services to discuss options for funding the work at the high school and looking ahead to future financing for other projects in the district.
Ultimately the school board decided to take the steps to get a $5,575,689 first mortgage bond.
Because the school district has debt falling off this year, the bond should not result in an increase of tax rates for taxpayers as long as the county’s assessed value remains constant, said Joe Ciancio with Baker Tilly.
“This provides a great opportunity for the school corporation to issue debt to fund future projects, but also maintain an annual debt service payment level at roughly $3.9 million,” Ciancio said.
Thoman and Performance Services had been working with Director of Maintenance and Grounds Jimmy Jackson on reviewing the high school’s condition. The highest priority is overhauling the HVAC system, including replacing all mechanical systems, at a price tag between $3.8 and $4.8 million, Thoman said.
“There is a bit of a spread there and a lot of that has to do with the current bidding market in terms of material prices, like lumber and steel prices. We don’t know what this will look like two or three months down the road. We’re trying to provide a range,” Thoman said.
The next item on Jackson’s priority list is renovating the locker rooms at the high school, which would cost between $650,000 and $750,000.
“They are in pretty rough shape, more of a spruce up, painting, new flooring, making the restrooms ADA accessible, modifying the shower areas and things like that,” Thoman said.
Installing epoxy flooring in the corridor outside the locker rooms on the north side of the gym was also proposed at between $55,000 and $70,000.
Thoman said after those projects are completed, an additional $1.5 to $2 million would be needed to complete other renovations there, like replacing the remaining HVAC system in the gym, weight room and wrestling room.
Other non-budgeted renovations include upgrading the science room’s HVAC, adding storage to the exterior of the building, and installing new concession stand cabinetry.
Based upon this year’s net assessed value of property throughout the county, the school corporation’s debt limit is around $9.6 million and the district currently has five outstanding bonds that are subject to that limit, leaving $2.4 million of remaining general obligation debt limit capacity.
Since the amount the district wants to borrow this year is greater than that, Ciancio said the funding mechanism will be slightly different as a first mortgage bond.
“It’s still the same type of mechanics, it’s just those bonds are not subject to the debt limit,” he explained to the board.
Because the board is borrowing no more than $5,575,689, this means they are funding a “non-controlled project,” “meaning the taxpayer and voters don’t have official control to stop a project,” said Jane Herndon with Ice Miller.
One of the funding options Ciancio presented to the board was breaking proposed projects into smaller components and funding them in two different phases by issuing bonds this year and next.
“Issue a bond this year that would be up to that non-controlled threshold amount of $5.575 million, then come back next year and issue a bond that would go up to that threshold again,” he said.
Ciancio said that doing a bond this year and next would give the district the ability to address immediate needs in the school buildings, like HVAC systems at the middle school and Van Buren Elementary School, while preserving flexibility to take on additional debt without raising payment levels as the bonds are paid off.
“The school corporation is really in a good spot given we’re looking at repaying these bonds in under 10 years,” said Belvia Gray with Baker Tilly.
“You’re saving on interest expense, which is a good thing. Not every school is in this position. We nudge towards shorter repayments if we can.”
The school district has been in the mode of holding its debt threshold stable so that taxpayers do not see an increase in their tax bills, “replacing debt that effectively falls off because you paid it off, like paying off your house and you no longer have that payment anymore. So when that falls off, then (we’re) replacing it with a new issuance to be able to attack a project that is in need,” Superintendent Laura Hammack explained May 20.
The board was presented with three different funding levels, with the other two resulting in possible remonstrances if bonds went over $5.575 million and over $16.727 million.
Asking for more than $5.575 million in bond funding would make the project subject to a possible remonstrance petition. Going over $16.727 million in bond funding means the taxpayers would have the legal ability to file a petition and request a referendum election, Herndon explained.
“I don’t see any need for us to go through that process, so long as you tell us we can do what we need to do, break them up into the pieces in which we need to break them up legally,” board member Amy Oliver said about pursuing more than $5.575 million in funding.
The HVAC project at the high school would happen in the summer of 2022, but bids would have to go out for that work this fall due to busy contractor schedules.
