Jessica Cejnar / Friday, Aug. 9, 2019 @ 4:34 p.m. / Education
School Board to Consider Refinancing $25 Million Bond; Budget Deficit Lower Than Initially Projected
The local school board may take advantage of low interest rates and refinance a $25 million voter-approved bond, potentially saving taxpayers money.
Del Norte County Unified School District has sold roughly $20 million since voters approved the GO Bond in 2008, Jeff Napier, assistant superintendent of business, said Thursday. With long-term interest rates at 3.5 percent currently, refinancing the bond would allow property tax assessments to stay the same if the district decided to sell the remaining $4.9 million, he said.
“If we are thinking about selling bonds at any time in a year, interest rates are the lowest they’ve been right now,” Napier said. “Interest rates are fluctuating every day. The advice we were given is to be thinking about ‘let’s get this moving,’ because we don’t know.”
Napier and District Superintendent Jeff Harris urged board members to get more information from financial advisors Jon Isom and Rick Han, who helped the board refinance $5 million in bond dollars a few years ago. The school board agreed to place the issue on its Aug. 22 agenda.
According to Napier, if the school board approves refinancing the GO Bond, property tax assessments would remain $53 per parcel if the district decided to sell $5 million that’s left in the bond.
The question about whether to refinance the GO Bond comes as the district is pursuing state hardship dollars to modernize its schools.
According to Napier, a modernization project at Joe Hamilton Elementary School received approval from California’s Division of State Architect. He said the project is ready to go to bid, but the district doesn’t have the money currently.
Harris noted that the district’s facilities director, Steve Morgan, has been pursuing hardship loans at the state level for the district’s modernization projects, but having about $5 million in bond moneys available is a “big sticking point.”
“With facilities hardships the state pays a certain percentage. Financial hardship pays more,” Harris said. “One question is can you issue more bonds and we always had $5 million that could be sold.”
Selling the remaining $4.9 million in bond dollars would make that money available for school projects and potentially allow the district to be eligible for state financial hardship funds in the future, Harris said.
The district is currently planning six modernization projects, but doesn’t have the money for them currently, Morgan said. However, the district will be reimbursed eventually for 60 percent of the cost of the Joe Hamilton project through Proposition 51 dollars. The project at Joe Hamilton is expected to cost about $2.5 million, Morgan said.
Approved by California voters in 2016, Prop 51 set aside $9 billion for construction and improvement at K-12 schools and community colleges.
Without that last $5 million in GO Bond funds, Morgan said, projects get pushed “farther and farther down the road.” Seven fire alarm projects will be finished with $2.3 million the school board authorized district staff to spend, he said. Those dollars will also be used for the architecture design work for the six modernization projects so they would be eligible for Proposition 51 money in the future, according to Morgan.
“And on top of that everywhere you go you see rust and you see rot and you see roofs that need replacing, paint hasn’t been done on any building for many years, HVAC units are 25 years old and could fail at any time on a lot of our buildings,” he said. “The list goes on and on.”
The district also needs to spend $400,000 to $500,000 to replace carpet and tile and paint classrooms at each school site, Morgan said.
Meanwhile, according to Napier, thanks to a $223,000 Career Technical Education Incentive Grant from the state, an increase in unduplicated student enrollment and a reduced Public Employees Retirement System rate, the district’s projected deficit has decreased to $260,000 for the 2019-2020 fiscal year.
The district had initially projected a $450,000 deficit in 2019-2020 and a $375,000 deficit the 2020-2021 fiscal year, according to Napier. At the school board’s July 11 meeting, he said the district would dip into its reserves to pay bills this fiscal year and the following year and needed to come up with a fiscal plan if things “go south.”
On Thursday, Napier said the district’s projected ending fund balance for 2019-2020 is $4.7 million with an unrestricted reserve of $1.3 million.
Trustees also unanimously approved a memorandum of understanding with the Yurok Tribe to share the cost of obtaining a 300 kilowatt generator for Margaret Keating Elementary School.
The generator would provide electricity to the tribe’s head start and child care building near the school during a power outage.
DNUSD was initially in the process of procuring a 250 kilowatt generator at an estimated cost of $327,000. The district offered to purchase an upgraded generator if the tribe covered the additional cost as well as moneys needed for the gear and wiring needed to connect the equipment to the head start building. The extra cost will be roughly $120,000, according to the MOU.
The district will own the generator and will be responsible for its maintenance. If the generator is used by the head start and child care programs on days school isn’t in session, the tribe will pay for the fuel, according to the MOU.