The county has more than $15 million to help meet some of the public school system’s increasing capital needs, commissioners learned Wednesday during a daylong special meeting.
And that amount will likely increase in the coming months from several sources, including a recent sales tax increase that the commissioners have dedicated to school building needs.
“This is a launching pad for future discussions on funding school capital needs,” County Manager Wayne Vest said. “We should be able to give the schools some sense of what dollars might be available. You have some flexibility. There are some rules, some confinement.”
Board Chairman Frank Quis said it would be “helpful for the Moore County Schools to know what they can count on.” He said county and school officials will be meeting in the coming weeks to talk about that.
“We are very blessed to have budgeted well,” Quis said. “All of this is adding up to a surplus that we are very fortunate to have.”
A big chunk of that — $10.5 million — is from what are called bond premiums on issuances to finance three new elementary schools in Aberdeen, Southern Pines and Pinehurst.
That is a financial practice wherein financial firms bidding on the bonds can provide more money than is requested because of its attractiveness to investors as a way to sweeten the opportunity to buy the bonds.
The county’s financial advisers and its bond counsel have said that typically those proceeds are used to pay down debt or fund other school capital projects that fit within the scope of what voters approved them to finance. They noted that the wording on the ballot in the May 2018 bond referendum did not specify a particular school or project.
In addition to that, the county has more than $1 million in interest earnings from bond proceeds sitting in the bank waiting to be paid out on the Aberdeen and Southern Pines projects. The county has not yet received any interest on the bond proceeds for Pinehurst Elementary, which will add to the total. Those bonds were just sold last month.
In the past, the county has used earned interest toward paying off debt, though its financial advisers and bond counsel said it could be used for other school capital needs.
Another $1.7 million is available in state lottery funds, though school officials have identified that as a source of money to help cover $3.3 million in cost overruns on the Southern Pines and Pinehurst projects.
Earlier this year, commissioners directed the school board to come up with some cost-cutting measures or other ways to cover those cost overruns to stay within the $103 million voters authorized the county to borrow.
The county also began levying an additional quarter-cent increase in the local option sales tax April 1, which voters overwhelmingly approved in a referendum last November.
Collections totaled slightly more than $1 million for the April-June quarter. If that trend continues for an entire year, that would be $4 million. The county and its financial advisers used an estimate of $2.8 million in their financial projections for how to cover the increased debt service on $103 million in bonds to finance the three elementary schools as well as a $20 million bond issue to finance a nursing education center at Sandhills Community College.
If collections continue on that pace, the county would potentially have another $1.2 million.
Vest said all of the revenues from the sales tax increase will be spent on school capital needs and “will not be diverted.”
“We are going to honor what we said we were going to do,” Commissioner Louis Gregory said of the board’s pledge to spend that money on school capital needs.
Mitch Brigulio, senior vice president of Davenport & Co., also noted that because of the county’s good financial management and fiscal condition both major bond rating agencies upgraded Moore County’s status this year, which has resulted in much lower interest rates than projected.
On the final $38 million issuance for Pinehurst Elementary last month, the county received a “true” interest rate of 1.91 percent, taking into account the premium offered by investors.
The county’s financial projections are based on a 4.5 percent interest rate.
“You are in good shape,” Brigulio said. “All of the debt service is covered. You have some flexibility.”
The commissioners voted in June to increase the county property tax rate by 4.5 cents to 51 cents for each $100 of value in part to fund the increased debt payments on the school and college bonds, as well as bank loans that are financing the $30 million McDeeds Creek Elementary School and a $16.5 million project at North Moore High School
One final component to the funding equation are sales tax refunds the county receives. The county pays the invoices for the projects enabling it to receive refunds on sales taxes. That is done on an annual basis
So far the county has received $219,000 for the Aberdeen project. Refunds for the other two school projects will come later.
Tom Lee with the county’s bond counsel said state and federal tax laws limit using that money mainly for capital needs that is “tied to a particular project.”
“You treat it as unspent bond proceeds,” Lee said.
The school system has identified nearly $1.3 million in urgent capital needs at Carthage, Vass-Lakeview and Sandhills Farm Life Elementary schools and Elise Middle, for such as replacing or repairing heating and air conditioning systems.
It also has a list of more than $70 million in maintenance and capital needs that are likely over the next 20 years.
Vest said the county still needs to work out the “mechanics” of how to allocate additional revenues from the quarter-cent sales tax increase “for the schools to be able to bring forward requests for using the excess funds.” He said that amount could continue to grow each year as sales taxes increase.
He added that overall, “this analysis shows we’re in great shape.”
Contact David Sinclair at (910) 693-2462 or firstname.lastname@example.org