Clarification on Future School Bond Referendum

[Daniel Head]

Dear Commissioner Hamilton and Board Members,

I am writing as a concerned constituent seeking clarity on the next school bond referendum. I have been closely following the current bond referendum and communications from CHCCS District Staff regarding the proposed $300M + $100M bond options. Each option includes promises about future rebuilds contingent on the next bond referendum.

To understand the oversight and role of the BOCC in the school bond process, I have a straightforward question: Can CHCCS District Staff, or anyone, provide certainty that there will be a bond referendum in 10 years that will be voted on?

A clear "yes" or "no" to this question would help address concerns about the promises being made to the public and the potential implications for future BOCC members and constituents. If the answer is no, it seems the current discussion points by CHCCS District Staff and BOE could place future BOCC members in a difficult position. .

Thank you for your attention to this matter.

Best regards, 

Daniel Head

[Jamezetta Bedford]

Mr Head,

On behalf of the BOCC, thank you for this question. The short answer is no. Current boards cannot bind future boards to take most actions. The $100M is not in bonds. It is in current tax revenues called "pay-go."  The BOCC purposefully chose that revenue option because it allows more flexibility to change or stop that funding depending on economic conditions.  

That said, over the 32 years that I've lived in OC, there has generally been a school bond about every ten years. But, more importantly, the consultant recommendations include the order to do the renovations/new builds even if it takes longer than expected. All of the schools that are not being closed (FPG closing at this time), will have the basic maintenance and safety included in these next ten years from Plan A which can be accomplished without any bond funding.  I hope that answers and clarifies your question. Please let us know if you have follow-ups. 

Jamezetta Bedford, Chair

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From: Daniel Head <daniel...@gmail.com>
Sent: Wednesday, June 26, 2024 2:31 PM
To: ALL_BOCC_MANAGER_CLERK <OCB...@orangecountync.gov>; Jean Hamilton <jham...@orangecountync.gov>
Subject: [EXTERNAL MAIL!] Clarification on Future School Bond Referendum

 

[Jamezetta Bedford]

You have identified key variables: construction costs and increased tax revenues. I'd also add interest rates and that timing of the borrowing. 

1. If interest rates decrease, we can do more with the borrowed bond funds for school facilities.
2. If construction costs decrease, then yes we could do more for school facilities
3. Increased revenues could also help do more for school facilities. But there is nuance with property value reassessments.  This typically occurs every four years and is currently underway.  Then the BOCC resets (lowers) the tax rate to be "revenue neutral" so that the same revenue is forecast. Now on average that means no increase, but absolutely individual owners will have ups and downs. For the last re-eval, for example, folks in neighborhoods adjacent to UNC-CH had large increases.  And based on all of these estimates and projections we think overall for all county debt, not only for schools, the tax increase is over 8 cents and the current plan is to start taxing it in 2025. And this tax will be on the increased appraised values. That timing could be changed. It was changed with the 2016 bonds and the rate was increased incrementally. It costs more, but gave residents time to adapt their budgets. That also will be decided annually by future boards. We have provided 5 year incentives to some of the large commercial entities along I40 around Efland that only have about two years remaining. Those are already included in the debt model. If there is additional commercial development, that would increase and diversify the tax base revenues. The other key revenue source is sales tax. This is more unpredictable. And, this is another reason the debt model is updated annually for the BOCC and Finance gives us quarterly overall updates. So we just don't know and overall we have a conservative projection based on conservative assumptions. 
4. Assuming voters approve the $300M for schools, then the BOCC can borrow and spend those millions only on school capital facilities. However the timing can be somewhat flexible. We cannot do all of the building in one or two years so it is now planned in three tranches of borrowing. That provides flexibility too. Imo, the biggest benefits of doing a general obligation bond approved by voters is it ensures the funds can only be spent on schools and it will have the lowest interest rate.  (Each spring when the county borrows limited obligation dollars, when rates were decreasing, refinancing to the lower rates was customary.) 

So yes, it's possible that more could be renovated than planned. I have doubts personally and am used to increasing costs and unexpected problems discovered during building. I do hope that having the triple A bond rating will get a lower rate of interest than projected. The state, for example, could do a school bond with zero or low interest for schools. We advocate for that every year to the General Assembly.  During the great recession the feds gave schools zero interest rate loans for shovel-ready projects. That's how the arts wing at Carrboro High and the auditorium at Gravelly Middle were funded. 

So all of these variables and some I'm not even thinking to list are why the plans will be reviewed and updated at least annually by the BOCC and both school boards. 

Jamezetta

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From: Daniel Head <daniel...@gmail.com>
Sent: Thursday, June 27, 2024 1:45 PM
To: Jamezetta Bedford <jbed...@orangecountync.gov>
Cc: ALL_BOCC_MANAGER_CLERK <OCB...@orangecountync.gov>; Jean Hamilton <jham...@orangecountync.gov>
Subject: [EXTERNAL MAIL!] Re: [EXTERNAL MAIL!] Clarification on Future School Bond Referendum

 

Hi Jamezetta,

Many thanks for your concise and speedy reply. The context is helpful. I also really appreciate the opportunity for follow-up questions. I do have one, and I apologize in advance if it's not a well-educated one, but I'm still trying to understand how everything works. With your comment on the pay-go option that allows more flexibility to change the funding depending on economic conditions. I'm wondering if this also includes a scenario where, for example, in 5+ years after a new property value assessment and tax revenues are higher and construction costs continue to decrease to pre-COVID levels, and there's enough savings in the bond money and opportunities from revenue, then funding could potentially "change" and allow additional funding for an extra replacement school under this bond rather than a replacement bond. In a previous email from you I know you listed that there are hundreds of variables that cannot make any plan for sure, but I'm just curious if any kind of funding scenario could change enough down the line where it's then allowable to do more under this bond than currently envisioned, or perhaps that's not the case.

Thanks!

Daniel