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~eview o~ Alternative ~ to F~nance <br /> Public ~hool Construction Costs <br /> <br /> We are pleased to review alternative ways to fund public school <br />construction costs. We are also pleased with the interest and constructive <br />concern expressed to you by county commissioners, legislators, and other <br />officials involved in the funding process. <br /> <br /> First, of course, is our traditional method of each county issuing <br />bonds on its own faith and credit when approved by the voters. This <br />procedure will continue to be available since no change in this authority is <br />contemplated. Each board of county commissioners will have the authority to <br />decide whether to borrow on the open market or from the proposed loan fund. <br />In either event, local sales tax revenues are available for debt service. <br /> <br /> Second, local pay-as-you-go financing may be followed, using the local <br />revenue stream created by the General Ass~mbly's earmarking of ocal sales <br />tax revenues for school construction and debt service. This method of <br />financing does not require a referendum, but is subject to availability of <br />funds and continuing annual appropriations. While pay-as-you-go is a <br />desirable objective, its effectiveness may be mitigated by the length of <br />time'necessary to accumulate enough money for even a single school building <br />and by the present need to catch-up anO to comply with basic education <br />facilities standards. During the accumulation period, the impact of <br />inflation on construction costs could well equal or exceed the debt service <br />requirements of a bond issue. <br /> <br /> Third, is a local combination of issuing bonds and pay-as-you-go, <br />depending on availability of revenues and the timing of construction <br />required to meet facility needs and standards. Of course, to the extent that <br />sales tax revenues are used for pay-as-you-go the co,q~nissioners may have to <br />levy increased property taxes for debt service. <br /> <br /> Fourth, the General Assembly could ass~e full responsibility for costs <br />of construction, as ~ell as for operations, using the proceeds of State bond <br />issues, appropriations for pay-as-y~u-go+ or a combination of bonds and <br />pay-as-you-go. This approach would probably mean that the General Assembly <br />would have to levy statewide what is now a local option sales tax levied by <br />county commissioners, or increase state income taxes. An obvious benefit of <br />this method of financing w~uld be the lower borrowing costs associated with <br /> <br /> <br />