Carmi White County Community Unit School District 5 Board of Education met March 4.
Here is the minutes provided by the board:
The special meeting of the board of education of Carmi-White County Unit District No. 5 was held on Monday, March 4, 2019 at Jefferson Attendance Center (new building). The meeting was called to order by Kelli M. Chapman at 5:30 p.m.
RECITAL OF PLEDGE OF ALLEGIANCE
The Pledge of Allegiance was recited by all present.
Those present were board members Acord, Chapman, Fulkerson, Hammell, Hoskins, Mitchell and Scates. Others present were Superintendent Brad Lee; Dr. Amy Dixon, principal at Jefferson and Lincoln Attendance Centers, Amy Atteberry, principal at Washington Attendance Center, Bart King, junior high school principal; Jarrod Newell, high school principal; Bob Lamp, CWCEA Representative; Tom Crabtree, Director from Stifel, Nicolaus and Company Inc.; Rachel Blazier, Unit Secretary; Mark Cox and Sabrina Cox, visitors; and Jeff Skaggs, reporter for The Carmi Chronicle.
PUBLIC COMMUNICATION WITH THE BOARD
There were no public communications with the board.
FUNDING OPTIONS
Superintendent Lee reiterated that a couple of board meetings ago, the district’s architect provided some information on what it would cost to renovate its current elementary buildings or the cost to build a new K-6 or K-8 building. Mr. Tom Crabtree, director from Stifel, Nicolaus and Company Inc. was in attendance at tonight’s meeting to discuss bonds and funding options.
Mr. Crabtree told the board that state laws are in place that mandate funding options for school districts. Any time that a school district is thinking about financing, it needs to consider what the law allows it to do. How an individual acquires a loan is different than how a school district can acquire a loan. School districts acquire loans through loan bonds, which are very much like a personal mortgage. Mr. Crabtree discussed some of the types of bonds that the State law allows.
1. Voted Bond: A voted bond goes to the public during a General Referendum. It takes a simple majority to pass and has to include an outline of the project and the amount to be borrowed. A voted bond allows the board and district to levy additional taxes and will increase property taxes.
2. Alternate Revenue Bond: White County passed a County School Facility Sales Tax a couple of years ago. This gives the district another source of revenue by using it towards a bond. This wouldn’t put all of the district’s money up front. This bond could be used to construct a new building or fund part of the construction of a new building.
3. Health Life Safety Bonds: These bonds are used for specific projects. It is mandated by law that every 10 years a district must have an architect conduct a Health Life Safety Review and the district must bring all issues up to code. The HLS demands a district to bring all noted areas up-to-date and a district might have to increase taxes to see that this is done – not necessarily talking about renovating buildings.
HLS Replacement Facility allows a district to borrow money without being required to go to voters.
Voted Bonds and HLS Bonds are repaid from property taxes. Alternate Bonds are repaid from sales tax. The State mandates a 20% cushion from revenue received through a County School Facility Sales Tax because sales tax fluctuates. If revenue doesn’t come in as expected to support bond payments, then the district must go to tax payers to make the payment safe. This is not saying that the district couldn’t build up a reserve with sales tax that it receives but it doesn’t happen often.
Mr. Crabtree provided the board with information provided by Stifel for tonight’s bond update discussion. The first item that Mr. Crabtree discussed was the district’s outstanding debt profile. The district currently has two outstanding bonds: Series 2008 and Series 2011. Only one payment is left on the Series 2008 bond and will be paid in full in December 2019. The Series 2011 bond has another ten years before payments are complete. He discussed the “Next Call” on the Series 2011 bond, which means that within three months of call date (12/1/2021), they will look seriously for savings for the district by securing new interest rates, etc.
Next he discussed “Debt Limit & Working Cash Calculations”, which shows the debt limitation of the district that is imposed by the State. State law dictates the maximum amount that a district can borrow and runs off the EAV. Based on the 2017 EAV of $139,472,533 times 13.8% (cap that State imposes), the outstanding debt for the district at one time is $19,247,210. The outstanding debt of $5,715,000 must be subtracted leaving a remaining debt capacity (new debt) of $13,532,210. Alternate Revenue Bonds do not fall under debt limitations. The district could also go before legislation and ask that due to a once in a generation occurrence to receive an exemption of Remaining Debt Capacity. It is not guaranteed that it will be approved.
There is also a Working Cash Bond. A benefit of this bond is that the bond does not go to the voters for full resolution. A Working Cash Bond could be a supplement to other bonds that the district uses and has a one time to exceed the debt limit.
Existing Bond & Interest Levy Debt Services was then discussed. Presently the required tax rate is $.53. The EAV has been increasing causing the levy rate to go down. Existing principal and interest of bonds are paid from property taxes. Mr. Crabtree told the board to be mindful of how a new debt would affect the current EAV. Stifel made no predictions regarding growth in future EAV. Future growth shown on the provided chart was shown as zero for general purposes.
Example Use of County School Facility Sales Tax was discussed. Mr. Crabtree explained that looking at the chart it reflected the money that the district could get out of the sales tax. He explained that the district could go out as far as 40 years for payment on a bond but does not recommend this. He recommends 25 (possibly 30) years.
Mr. Crabtree discussed the Example Present Value Analysis of Bond and Interest Levy. This is a property tax supported levy and is both a voted and HLS issue. He explained that if the district added any new amounts to a 20 year payment, it adds about $.70 to additional tax rate. If you keep the illustration with the tax rate the same, there is no change in EAV and is very conservative. If EAV grows 1% year, there is a little more revenue every year. He discussed what an increase means to tax payers. On a house with a $100,000 market value, there would be an increase of $191.00 in over tax bill (jump) one time only.
Mr. Crabtree explained that he is just providing the frame work of obtaining bonds at tonight’s meeting and only talking in generalities. He said that he has no idea what interest rates will be in the future. A chart was provided showing historic interest rates from 3/1/99 through 8/17/18. He explained that his company’s purpose was to find a pool of investors and find the lowest interest rates possible. He said that Stifel is the #1 underwriter of school funds in America and in Illinois.
In review:
Sales Tax Supported $7,000,000
Property Tax Supported $14,000,000
$21,000,000 size project
Board Member Fulkerson asked what the normal timeline is for special legislation. Mr. Crabtree is that it will be March 2020 before a vote could take place. Before the December board meeting, the board would have to pass a resolution to put a question on the ballot. Voters would need to approve a specific dollar amount of a specific project. If it is a successful election, then the district would ask that special legislation be approved.
The district has recently completed a HLS survey. Superintendent Lee reported that it would cost $28,000,000 to renovate existing elementary buildings and between $22,000,000- $25,000,000 to build either a new K-6 or K-8 building.
Superintendent Lee told the board that a Capital Projects bill might pass by May 31, 2019. Our district was put on the list two years ago. Some districts have been on the list since 2004/2005. Some legislatures are talking about starting fresh but this is an unknown. If money becomes available, it may offset some of the costs. Mr. Crabtree also said it was uncertain if there would be any money to put towards the Capital Projects.
Board Member Fulkerson asked if Stifel considered local banks as investors. Mr. Crabtree said that they definitely talk to local banks and they always have an opportunity. He explained that Stifel used full public issuance. Some could be in small increments. It is good for PR and could be beneficial to districts because of the interest rates.
Board Member Acord asked Mr. Crabtree how the board would explain the district’s $5,000,000-$6,000,000 investments. Mr. Crabtree said that one of the big variables in obtaining a bond is credit rating. Standard and Poor is one company that gives districts a letter grade. The better the rate, the lower the interest rate. One of the main factors is fund balances. The more cash reserves, the better rating a district will get.
Superintendent Lee reviewed the following with Mr. Crabtree:
$7,000,000 1% sales tax
$14,000,000 HLS or voted bond
$21,000,000
This leaves the district still needing $1,000,000 - $4,000,000. Mr. Crabtree said that at the vote, the district could ask for $17,000,000 banking on exemption for 25 years. Use a Working Cash Fund of $1,000,000. He explained that it would be tight.
Board Member Acord said that if the district asked for a $17,000,000 bond, the public is going to ask what this is going to do to their property taxes. Mr. Crabtree said that the board needs to look at some kind of growth, even if it is.25% every year. Superintendent Lee said that he thought that you could look at the past history of 20 years and divide it out to get the average. Acord said that he didn’t want to put that there was going to be growth and then there wasn’t any and property taxes would increase. Superintendent Lee said that going forward, it is what the board decides. Does the district want to build something new or does it want to maintain the buildings that it has? Mr. Crabtree said that there are various options that Stifel could provide: what does 25 years get the district, what does 1% of sales tax get the district, what does 1% growth on EAV get the district, etc.
Mr. Crabtree said that it is a critical juncture putting it to vote. Do you even want to consider a vote and not get the answer that you want? There is a risk because voters may say no. The board needs full community engagement. Stifel can provide resources for a referendum, can provide some assistance through a PR team that they use, assist in pre-work, etc. He said that he would be happy to follow up. Mr. Crabtree then left the meeting.
Board President Chapman asked how the EAV will be affected when the coal mine goes off the EAV. Superintendent Lee said that it was going to affect the EAV when it goes off next year. He said that the buildings will stay on but the minerals will go off. Board Member Acord asked about the farming. Superintendent Lee said that farming and minerals have offset the EAV to balance it out.
Board President Chapman asked how the minimum wage would affect the district. Superintendent Lee said that there is talk of legislation that may slow the increase of the minimum wage down. It may change to $15.00/hour up north and slow down once it gets farther south. He said that the increase in minimum wage will have a significant impact on the school district.
AJOURN
Motion by Fulkerson, second by Acord, that the meeting be adjourned at 6:45 p.m. Motion carried by unanimous vote.
http://www.carmischools.org/images/pdf/minutes/mar_special_min.pdf
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