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ELC hears school building funding options

By Staff | Jan 17, 2014

When the Estherville Lincoln Central Board of Education began planning the new middle school and Demoney addition several years ago, the board had envisioned a Phase II to bring third and fourth graders from Roosevelt to Demoney.

Wednesday night, the board heard from a financial consultant who presented options for the Demoney expansion.

Travis Squires, senior vice president of public finance investment banking at Piper Jaffray & Co. of Des Moines, said there were four options available to the district:

n Cash on hand. Squires said general funds can’t be spent on capital projects. However, the statewide sales tax and physical plant and equipment levy (PPEL) money could be eligible. He said grants and donations could also be options; however, sometimes donations have strings determining where the money can be spent.

n PPEL capital loan notes. The district could sell bonds with future PPEL money paying them off, allowing borrowing until the end of life of the PPEL.

n Sales tax revenue bonds. The district could borrow against the statewide penny, with collection based on what is currently collected.

n General obligation bonds. This is the option by which most school building projects are funded, Squires said. This option requires getting signatures on a petition that specifies the bond amount and purpose.

Squires noted a number of constraining factors regarding funding.

One would be the constitutional debt limit. A district can borrow no more than 5 percent of the district valuation.

Another restricting factor is bonding capacity. This could be further restricted by the debt limit.

Once a voter-approved PPEL is in place, no other public input is required, said Squires. The district could then borrow against future PPEL revenues. He said financing with the voted PPEL could be either public or private, with private financing placed with one or more investors such as a bank. He said using voted PPEL financing could shift money away from the maintenance budget; however, he said there would be an average borrowing rate of 2.2 to 2.5 percent according to current rates. He said there could be no borrowing against a board-authorized PPEL.

State sales tax money is driven by certifiable enrollment, said Squires, with money going to where students live.

Squires said general obligation bonds require 60 percent voter approval. He said sales tax revenues could be used to pay down GO bonds. He said the existing bond for the middle school has to be used for that project and not a new one.

Original GO bonds for the middle school were $8.7 million. The school district has $6.8 million remaining,

The bonds against the sales tax were originally $2.8 million and are currently $2,045,000.