USD 108 board approves pursuit of bond issue

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The Washington County Board of Education voted unanimously during a special meeting on Jan. 13 to proceed with a bond issue of at least $1.61 million to finance a four-classroom and two-bathroom addition on the south end of the grade school. The bond issue could appear before voters in a special August election, according to discussion during last week’s meeting, although all discussion was preliminary. The bond issue, which would require a simple majority of votes cast to pass, would raise taxes, the group said.

A bond issue was not the route that board members and administration had planned to go days earlier, according to discussion at the board meeting. The board was set to approve a lease/purchase agreement, which is a rent-to-own-like agreement entered into by the school district where the district doesn’t have to pay the full purchase cost all at once. The lease payments would be paid for out of capital outlay to avoid raising taxes.

According to documents presented to the board for discussion on the lease purchase agreement during the special meeting, the cost of construction for the four new classrooms and new bathrooms plus fees and other professional services would be about $1.5 million. Superintendent Denise O’Dea told the board that she had seen those numbers only hours before the special meeting.

Financing options presented at the meeting for the lease purchase agreement showed several terms, but at 2.5 percent interest, a $1.61 million lease purchase over 15 years showed a mill levy of 3 – one mill generates about $45,000 in the district. A $1.915 million lease purchase, which would include the high school gym roof that the board said cannot wait, over 15 years would be 3.5 mills. Ten-year options instead of 15 years pushed the total to 4.25 and 5 mills. The board was told that a 15-year lease was about the maximum they could go because fewer banks will be interested in bidding on a lease longer than that.

“I really thought it would come out at 2 mills,” O’Dea said of the higher-than-expected payment amount for the lease purchase option. “I’m really nervous at 3 mills.”

O’Dea said she was not comfortable with the options for a 10-year lease purchase where the payment would eat up 4 or 5 mills. She said she was concerned about tying up even 3 mills for 15 years.

“I don’t want my legacy to be that I screwed up this district,” she said of the financial strain that could result in the 15-year commitment. “I don’t want to be where we were 5 or 6 years ago where the district had no money.”

“It takes about $100,000 a year to run this district capital outlay wise,” she said.

Dustin Avey with Piper Sandler spoke with the board at the special meeting and said that while it is preferred to pay for things with cash, cash is hard to replace. Paying for the school addition with cash through the lease purchase agreement would greatly limit the amount of cash the school had for unforeseen bus or HVAC issues.

“From a finance perspective, I would like to finance it with a bond issue to free up capital outlay,” he said. “I’ve talked to districts that are 5 to 7 years into a lease and wishing they didn’t have the lease.”

When discussing the bond issue, Avey said money is cheap right now, and interest rates for a bond would probably be less than 2 percent.

Board member Rod Stewart said he has concerns about a bond issue because it would raise taxes if it passed, and his ag buildings have tripled in valuation over the last three years. He said he doesn’t want to contribute to any more increases.

Board member Ronda Manley agreed and said many people in the school district are elderly and don’t have kids or grandkids in the school district.

It was the consensus of the board and administrators that space is needed at the elementary, though, and they agreed that a bond issue to finance classroom expansion was probably the best place to start now that the numbers for the lease purchase agreement have come in much higher than expected.

“It might not pass, but then we would know that,” O’Dea said of the bond issue. “Then we would stockpile cash and maybe do a lease purchase in a couple years.”

O’Dea said the gym roof replacement could also be put into the bond issue of the Board of Education chooses. If the roof is included with the classroom addition, the bond would increase to $1.91 million, and over the life of the 15-year bond, that would be a 3.5 mill increase in bond and interest.”

Avery said if the bond passed for the 3.5 mills option, it would increase taxes on a $75,000 home by about $30 a year. A quarter section of dryland ag land would increase by about $80.

Growing needs

O’Dea said during the special meeting that she had met earlier in the day with elementary principal Amy Hoover and high school principal Brock Funke after she saw the lease purchase agreement numbers come in much higher than expected. She said the trio began to discuss how they could reconfigure classrooms next fall to accommodate the large class sizes as well as the two additional class splits that O’Dea said must be done next year. She said next year’s third grade and next year’s fifth grade must be split into two sections in the fall; those grades are currently one section. Two new teachers will be hired for next year for the new class splits.

The school board and administrators had hoped for construction to start on the classroom additions by this April if the lease purchase agreement had been approved during the special meeting last week. This would have allowed the construction to be complete by about Sept. 30. Now that the board will wait and do a bond issue, construction will be delayed by about a year, which Hoover said will force the district to “get creative” with classroom space next year.

O’Dea and Hoover said they did not yet want to share how they will come up with two additional classrooms for next fall, but there is a plan.

O’Dea told the Washington County News that administrators have plans to occupy all of the four classrooms that are planned in the new elementary construction.

“If we had the room, we would have two sections of all grades K-6,” O’Dea said.

O’Dea said that first grade was the only grade that was split into two sections when she came to the district in July 2016. The district split kindergarten into two sections that fall, and a few others classes have been split since that time as needed.

O’Dea said that next fall there will be two sections of kindergarten, first grade, second grade, third grade and fifth grade. She said fourth grade and sixth grade next year will remain in one section.

“Our current preschool is 21 [kids],” she said. “Our experience with our preschool numbers is if we have 20+ in preschool, we will have 30+ in kindergarten the following year.”

O’Dea said the district has grown from about 324 kids in 2016 to 397 kids as of Tuesday when two new kids enrolled at the district. O’Dea said enrollment for pre-school through Grade 12 on the first day of school this year on Aug. 19 was 382.

“In a community this size, that is a lot,” she said of the school’s growth, adding that most of it is in the elementary.

She said she wishes she could see into the future to see if the increased number of kids would stay in the district.

Since school enrollment in August when numbers were unexpectedly higher, the board members have been discussing options for additional classroom space. About three years ago the district moved the remaining middle school classes out of the old grade school and into the newer grade school complex at the high school. The old grade school building now houses only the district office and the after school PowerZone program. School administration has said at previous board meetings that they don’t want to move classes back to the old grade school because of the instruction time lost when the kids walk back and forth between the two buildings as well as some behavior issues that happen during those walks.