Williamsburg Board examines finance options for improvements
By ANDREA FURLONG
Initial estimates toward school improvements at Williamsburg High School and Mary Welsh Elementary bear a price tag of approximately $34.5 million.
The Williamsburg School Board reviewed the estimates and financing options at a special meeting held Nov. 4. The estimated costs, calculated by Neumann Monson Architects, Iowa City, provide for repairs and renovations within the high school, additional classrooms at Mary Welsh, additional classrooms at the high school and a new gym and new auditorium at WHS.
BREAKING DOWN THE TOTAL
Neumann Monson estimated $7 million for upgrades and repairs to the high school. The estimate includes asbestos removal from the auditorium, upgrading the high school’s heating, ventilating and air conditioning (HVAC) system to a geothermal system, American Disabilities Act (ADA) access to the auditorium stage, new flooring inside the auditorium, sidewalk repairs, a handicap ramp outside, remodeling restrooms according to ADA standards, electrical upgrades, remodeling of locker rooms and more.
The cost to add a wing of eight classrooms to Mary Welsh, each classroom measuring 1,200 square feet, is $3.8 million. That estimate also includes soil borings, architect and engineer fees, landscaping and site work.
The construction of two full-size gym floors side-by-side is $11.3 million. A new 800-seat auditorium (200 seats more than the current one) is projected to cost $9.3 million. An addition of six classrooms to the high school is estimated at $1.5 million. The architects estimated it will cost $1.6 million to convert the existing auditorium into a media center, turn the current band and vocal room into science rooms and repurpose the resource center into classrooms.
Matthew Gillaspie, an investment banker with Piper Jaffray, presented the board with four methods to finance the school improvements. Gillaspie based his calculations on the district’s most recent valuations (January 2008). He noted that one method could be used to fund all the improvements or a combination could be used.
• Borrowing against a voted PPEL (technical term is general obligation PPEL capital loan notes)
The Williamsburg School District does not currently have a voted Physical Plant and Equipment Levy (PPEL) in place.
Borrowing options: Can borrow up to $1.7 million with 67 cent PPEL (67 cents per $1,000 taxable valuation); up to $3.5 million with $1.34 PPEL.
To establish: Need 50 percent voter approval.
Duration: Maximum 10 years.
Pros for the district: The school district has the authority to borrow from PPEL, as well as spend it toward any permissible uses, without needing voter approval.
“That’s a nice feature of it — when you have something that you as a board believe the district needs, but people in the community may not understand that you need or actually don’t think you need,” Gillaspie said.
Cons for the district: If any portion of the PPEL is collected through income surtax, the PPEL vote can only occur once a year during odd-numbered years (during a school board election). Otherwise, if the PPEL is levied 100 percent against property tax, the PPEL vote can occur up to four times a year.
• General obligation bonds
The Williamsburg district would issue a ballot question to district voters asking their permission to take on a specific amount of debt for a specific purpose. A ballot question on general obligation bonds might say something like, “Can the school board go into debt for $11.1 million to build a classroom addition to the high school?”.
Borrowing options: Up to $11.2 million, at the rate of $2.70 per $1,000 of taxable valuation; up to $16.8 million with $4.05 limit.
To establish: Need 60 percent voter approval.
Duration: Maximum 20 years.
Pros: The district can borrow at lower interest rates and “can do whatever it takes to raise property taxes to pay this debt back,” according to Gillaspie.
Cons: Could be difficult to lock in 60 percent voter approval on a ballot question that specific. In order to borrow beyond $2.70 (up to $4.05), the district will need 60 percent of voter approval again on a second ballot question. It can also be voted only four times per year.
• Borrowing against Local Option Sales Tax (technical term is sales tax revenue bonds)
The board can take this option right now, if it wants to.
Borrowing options: Up to $8.2 million.
To establish: School board can vote on at any time.
Duration: Through December 2029.
Pros: The district has the authority to pass any time, without voter approval or public hearings.
Cons: This type of debt can only be paid back with sales tax revenues. Also, while Williamsburg School District could levy up to an estimated $9.1 million, only $8.2 million would be available for the project, due to underwriting costs, costs for issuances and a payment for a debt service reserve fund. Borrowing costs are generally higher than general obligation PPEL capital loan notes or general obligation voted bonds.
• Qualified School Construction Bond (QSCB) issuance on sales tax revenue bonds
School districts given the authority to borrow under this new federal program may be able to borrow with little to no interest. Instead of making interest payments to the bondholder, the federal government will give the bondholder a tax credit. The bondholder is generally a very wealthy party.
Borrowing options: Up to $10.3 million at 0 percent interest; up to $9.3 million at 1 percent interest; up to $8.5 million at 2 percent interest. All are estimates at this time.
To establish: School board would have to approve, and then be approved by federal government.
Duration: Has varied anywhere from 14 to 17 years. The federal government determines the borrowing period on a weekly basis.
Pros for the district: Payments are made into a sinking fund, which can accumulate interest until the day the debt is paid off. Millions of dollars can potentially be saved, if the district does not have to pay interest on its payments, while its sinking account fund generates interest toward repayment.
Cons for the district: There are only about five entities in the country buying QSCB bonds. It is unusual to find a local bank or local wealthy individual interested in these kinds of bonds.
“Whoever buys these . . . they’re going to have a CPA and maybe lawyers involved in this transaction. But, if you can save millions of dollars, it’s worth it to do for you,” Gillaspie said.
UPDATED November 18, 2009 2:06 PM