BEEVILLE – Trustees with the Beeville ISD have another option if they want to continue their efforts to build a new elementary.
“The district continues to analyze a range of solutions to address long-term facility needs, including innovative funding mechanisms in an effort to present the most cost-efficient package to our taxpayers,” said Superintendent Dr. Marc Puig.
Financial advisor Victor Quiroga told them last month that the needed $37.9 million could come in part from a loan that would not require voter approval.
“The school districts can only do what the state of Texas and under the Constitution allows you to do and what type of authority you have,” Quiroga told board members during their December meeting.
Typically, school districts finance new construction through voter approved bonds. Beeville tried this but both attempts were shot down by voters, albeit by a narrow margin this past year.
“However, there are other tools that are available to school districts that don’t require a vote, but the one restriction is that they are paid out of your maintenance and operations side,” he said. “So budget considerations have to be considered here.”
Puig said this week, “Lease revenue bonds provide an innovative financing alternative available for Texas school districts. In short, utilizing such an approach would lessen the overall bond amount for taxpayers.”
A school district’s tax rate is split in two. One side is called the maintenance and operations and is the amount determined by the district board needed to fund the operations of the school system. The other side is the interest and sinking and is the amount needed to repair voter approved bonds.
Lease revenue bonds are repaid with money from the operating budget of the district and not the I&S side, where voter approved bonds are repaid.
“The school district uses what we call a public facility corporation as a conduit,” Quiroga said. “And what we mean by conduit is that we’re going to use this corporation to borrow the bonds on our behalf.
“And then we make arrangements to repay the bonds.”
This corporation is run by the district’s board.
“And so once those bonds are issued, the district basically enters into a lease arrangement with the public facility corporation to repay them the bonds that were issued by the corporation,” Quiroga told trustees. “Under this mechanism, you are allowed to use those bond proceeds for new construction purposes.”
Once the bonds are repaid, the building becomes the property of the school district and the corporation dissolves.
The catch here is the district would likely be paying a higher interest rate.
“I’m just going to take the $10 million amount,” Quiroga said. “If we did a $10 million bond and the term repayment term was 20 years, the interest rate would be about 2.75 percent.
“And so the annual payments will be about $657,000.
“Under the lease revenue bond mechanism, the interest rates tend to be higher for these type of financing tools.
“So instead of a 2.75 percent interest rate, more likely than not, we’re looking at about 3.5 percent interest rate.
“So the annual payments wouldn’t be $657,000; it would be a little over $703,000.”
The district isn’t looking at the $10 million given in this example.
“Conceivably, the district is in a position to contribute anywhere from $2 million to $8 million from its fund balance toward the total bond package,” Puig said. “However, such an investment will entail trade-offs among competing strategic priorities within the district.”
During their meeting last month, Puig said that this was a financially doable option for the district.
“So the only reason we’re having this conversation ... we’ve looked at the projections internally and we’re sitting pretty good,” Puig said. “My point is we have to be as creative financially as we can if we want to try to approach this bond one more time in this community.
“I think the decision is what are we willing to say ‘no’ to if we say ‘yes’ to this? That’s the trade-off.”
The board has made no commitment to a third try at passing a bond issue.
“While no decision has been made, the district is carefully analyzing potential options for another bond election,” Puig said. “There remains an urgency to address our elementary school facilities.
“The district, in collaboration with community members, is studying both May and November 2020 as possible targets for another bond referendum.
“Again, no decision has been made.
“Bottom line, the dream of creating a new school for our BISD children isn’t going away any time soon — we can’t give up, our future depends on it,” he said.
Jason Collins is the editor at the Bee-Picayune and can be reached at 343-5221, or at media@mySouTex.com.