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ICASARRUS COUN~] ioRr~ CAROLIIA · Agenda 6/21/99 · To: Board of Commissioners Re: School Construction Funding Options At the May 17th Board meeting, staff was directed to formulate options related to the financing of two more schools (a new middle and new elementary school). Cost estimates for the projects exceed $30 million. Specific sites remain to be identified. In June 1999, we will complete the sale of $30 million of new debt for the high school. The debt service for that project is in the FY 2000 budget at an estimated cost of $2.7 million/year. The N. C. Local Government Commission has advised that it would consider authorizing the County to do another $30 million financing for the two new schools as was done for the high school. Doing so avoids the requirement for a local bond referendum, if the County Commission authorizes the new debt. Based on current assessment valuation, $2.7 million annual debt service represents three cents (3¢) on the County tax rate. Timino~ The County has an (AA--) rating with the three bond rating agencies (Fitch, Moody's and S&P). During rating presentations, staff detailed the potential for another $30 million in school projects. It is likely that the added debt would not adversely impact the County's bond rating if properly timed. New developments (Mills, Coming and others) should produce increases in real property valuations and gross revenue streams significant enough to moderate the impact of the added debt burden on financial ratios important to the bond rating agencies. The "trends" in these ratios will be better established in FY 2001. It is suggested that the "timing" of the sale of added debt ($30 million) be scheduled to occur in July 2000 (FY 2001). That will provide one year's spacing between debt issuances. That does not mean that the two school projects must wait until the spring of 2000 to begin. Some aspects of one or both projects may proceed (land acquisition, architectural and engineering work). However, issuance of construction contracts should be timed to coincide with assumption of new debt. Financin~ O~tions The annual debt payment associated with the added $30 million debt for the two new schools should approximate $2.7 million/year or three cents (3¢) on the current FY 2000 assessed valuation. If debt is sold before July 2000, a full year's debt service could be expected in FY 2001. Office of the County Manager 1