Lease-purchase funding
Shiner school board's public facilities corporation to oversee financing and building of new school
Friday, May 6, 2005
Barry Halvorson, Victoria Advocate Sports Editor
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SHINER - The Shiner school board transferred on Monday the land for the new
school to the public facilities corporation, which will oversee the financing and
construction of the all-grades complex.
Under state law, a school district is prohibited from entering into lease-
purchase funding arrangements but is allowed to form a school district public
facilities corporation that can make such contracts.
In the case of the Shiner school district, the school board also serves as the
board of directors for the corporation.
Of the estimated $8 million cost, the district has arranged for financing $7.8
million.
The board voted 5-2 as both trustees and as directors for the transaction with
Gloria Reindl and Michael Huser the opposing votes both times.
"I am opposed to this on the ground it has no safety net," Reindl said while
casting her vote. "It is not in the best interest of the students to compromise
our ability to educate our students with our debt."
Reindl, the former board president, said during discussion that she was concerned
about the dollar figures the district was basing the action on. In particular,
she stressed the fact that while former Superintendent Sam Atwood said the
district had an $860,000 fund balance, she said that $417,000 of that was money
the district shouldn't touch because it represents one month's operating
expenses, which she maintained the auditors said was a minimum the district
should keep in reserve.
She also said that she was unsure about the proposed $1.5 million fund balance
being predicted for the end of the current school year, saying the district
wouldn't have any actual figures until it goes to the auditors after the books
are closed out.
"If something happens, we could be back to where we were 24 months ago (when the
district had a negative fund balance) and I'm afraid that's just too close for
comfort," she said. "We were looking at cutting programs for students and
teachers just a short time ago. Where is the safety valve? Where do we go if
something happens?"
While Reindl expressed concerns, trustee Maurice Wilkinson expressed confidence
that the arrangements were solid. She told the board she has served on boards of
banks, two nursing homes and several other organizations that have done lease-
purchase projects.
"I don't share the anxiety of the others," she said. "We've been presented with a
lot of information and sure I'm more comfortable with it because of my
experience. We are not going to be led down a path."
Trustee Andrew Schacherl also supported moving forward, reminding the board they
are a policy making group that acts on recommendations from experts.
"It sometimes boils down to this," he said. "Ken Leach was hired to do a study
for us. And you have to trust the man we've hired to do the work right."
Reindl told the board during the meeting that she had been in contact with the
Texas Attorney General's Office and that they said that very few schools in the
state are involved with such large amounts in lease-purchase agreements.
Chancellor Financial President Bill Caraway, the head of the company providing
the financing, said that he was aware of three districts that have, citing
Southside in San Antonio, $7 million; Eastland, $3.5 million, and Houston, $35
million. The company will actually have two such agreements with the Shiner
district, one for $5.5 million to cover the actual construction costs and a $2.3
million personal property agreement to cover the cost of air conditioning, light
fixtures and other similar items that are not part of the brick and mortar
portion of the project.
The former board president presented a list of different school districts she had
heard were experiencing financial difficulties after entering into lease-purchase
building agreements. Caraway said he was aware of some of those situations but
added the problems were factors other than the building program, such as the loss
of students and tax base and possibly poor financial management.
After Reindl termed the financial arrangement a "no-win situation" for the
district she couldn't support because of the impact it would have on the
maintenance and operating fund, Caraway said that wasn't where the money would be
coming from. He said the district is already at the maximum $1.50 per $100 ad
valorem tax rate allowed by the state and the current law would prohibit a tax
rate to support the project.
At the board's Jan. 26 meeting, when he was hired, Caraway explained the
advantages to using lease-purchase agreements as opposed to traditional funding
methods such as general obligation bonds as including a dependency on local
property taxes and being able to use state tier 1 and tier 2 funding to pay off
the note.
Both Reindl and Huser maintained that the district also doesn't have enough
information about the project. Saying there were too many loose ends, Huser cited
specifically questions about who would provide electric service, septic system
concerns and roads.
The board addressed the electricity question by the end of the meeting, voting
unanimously in favor of Interim Superintendent Trey Lawrence's recommendation
that the district request the city of Shiner and not the Guadalupe Valley
Electric Cooperative provide that service.
Who actually has the Public Utility Commission service area rights for the area
is currently unclear.
During the citizens input portion of the meeting, Paul Morkovsky and Brenda Marek
said they felt that the district was moving too fact and that residents needed
more information to get on board with the project. Both indicated they felt the
district should have architectural drawings and other plans in place before they
should even consider the financial arrangements.
Marek said she was under the impression the board was looking at adopting a 20 to
30 year plan when it hired Leach. She added she favored a pay-as-you-go approach
to the financing of replacing buildings after the district has previously saved
up the money and staying at the same site.
Bryan-based architect Jim Singleton, who has been retained by the district to
develop a program and master plan for the project, said those documents were not
necessary to proceed. He said that based on his experience, he can readily
estimate what can be built from the available funds. But he said he is also
trying to adapt the plans to the district's and community's needs.
To achieve that goal, he has met with teachers from Shiner Secondary School and
Shiner Elementary.
"Every teacher I talked to was excited about the new school," he said. "In
particular they mentioned a desire for bigger rooms, proper facilities and a
better arrangement of space. The other thing that was prevalent was they wanted a
conservative design with no bells and whistles. They said the community needs a
good school, not something with a fountain feature in front that only looks
good."
In addition to the teachers, Singleton said that he will also schedule a future
day to meet with residents of the community. Those meetings will be an open
invitation rather than sessions with representatives of the community selected by
the district.
"I want to be as open-minded as possible. Right now I've got no preconceived
ideas. I've designed hundreds of different projects and have always collected
data and listed before putting anything on paper. And by including the teachers,
district staff and community in the design phase it will give the residents of
the city a sense of ownership of their own school."
Barry Halvorson is a reporter for The Victoria Advocate.
Contact him at 361-798-3888, or by e-mail at
hvilladv@vicad.com.
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