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County seeks to wring $170M from $150M bond package to pay for school system’s top roofing, HVAC priorities

Alamance County’s board of commissioners has resolved to press ahead with a dozen high priority roofing and HVAC projects that a recent county-authorized survey identified as some of the most urgent maintenance needs facing the Alamance-Burlington school system.

The commissioners have also tentatively agreed obtain the nearly $22 million needed to knock out this 12-item to-do list by cashing out a six-year-old bond package that area voters had previously approved on behalf of the schools.

The commissioners arrived at this two-part consensus during their latest regularly-scheduled meeting on Monday based on the advice of a financial consultant who has helped the county come up with a payment plan for its facilities-related expenditures.

During Monday’s three-hour confab, Ted Cole of Davenport Public Finance assured the county’s governing board that the county can readily fit an additional $22 million in bond debt into this payment plan, which relies, in part, on the proceeds from an 8-cent property tax hike that the board of commissioners passed in 2019. Cole insisted that this plan can handle the added debt burden thanks to lower-than-predicted interest rates and various other developments that have accrued over the years.

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Ted Cole of Davenport Public Finance during commissioners’ meeting on February 19, 2024.

“Every year, we circle back with staff to see where these numbers have actually ended up,” he went on to explain in his briefing, “and there have been positive variances since the beginning.”

Cole reminded the commissioners that the county’s payment plan currently includes the annual payments on the $130.5 million of a $150 million bond package that the local electorate approved on behalf of the school system in 2018. Rather than simply issue the entire voter-authorized package, the commissioners had found it cheaper to issue the first $130.5 million in bonds and obtain the rest of the $150 million as so-called bond “premium,” or additional cash that bond purchasers were willing to loan the county on more favorable terms than the actual bonds.

By “taking” this premium, the commissioners had effectively secured the full $150 million authorized by the voters, and so they initially resolved not to issue the rest of the package in order to scrupulously adhere to what they believed was the electorate’s will. On Monday, however, Cole assured the commissioners that they can legally issue the rest of the bond package’s face value and net $170 million-plus to pass along to the schools.

Cole assured the commissioners that they are legally permitted to take on this additional debt even though the bond order they approved in 2018 had explicitly authorized the county to issue “school bonds in an aggregate principal amount not exceeding $150 million.”

“I know it sounds like I’m speaking out of both sides of my mouth,” he acknowledged, “ but you are not issuing more than the $150 [million in principal] that [the voters] approved…This would be in excess but it would be absolutely in line with what the voters approved.”

The county’s consultant added that the bond market will probably offer some additional premium on the package’s remaining $19.5 million. He estimated that this bonus debt may be somewhere in the neighborhood of $2,222,462 – which would bring the total proceeds from the potential second bond issue on behalf of the schools to $21,737,462.

“You don’t have to take that premium,” the consultant added. “You can lower the amount of bonds issued and only take the nineteen and a half…but what we’ve run through the model is the twenty-one seven at a 5 percent interest rate.”

Cole insisted that he wasn’t trying to steer the commissioners toward the option that would yield $21.7 million in proceeds. Yet, the county’s governing board was, more or less, led in that very direction when they received an update on a recent facilities assessment from assistant county manager Brian Baker.

Earlier this month, Baker had presented the commissioners with a list of 21 putatively urgent roofing projects that an engineering firm in the county’s employ had identified throughout the school system’s facilities. He also gave them another slate of high-priority HVAC work that another firm had assembled – with a total price tag of about $92.5 million between the two lists.

Assistant county manager Brian Baker

On Monday, Baker returned with a new, 12-item inventory that he had distilled down from the two previous lists. This new roster bore a price tag of $21,980,213 that Baker admitted he and his colleagues “didn’t pick out of the air.” In either case, he told the commissioners that they could embark on these 12 items as the first round of what he envisioned as a multi-year venture to upgrade the school system’s roofs and HVAC systems.

“This is a time-consuming process for the engineers and the staff,” Baker went on to admit, “but I anticipate that we would continue this every year, as funds become available.”

The commissioners, for their part, had previously been reluctant to milk the school system’s bond package for more than the $150 million that had been presented to the voters in 2018. Some of them expressed inklings of this same sentiment on Monday.

Commissioner Bill Lashley suggested, for instance, that the county doesn’t necessarily have to “accept” any additional premium when it issues the remaining $19.5 million of the bond package.

“If we only take nineteen and a half million not only will we save money on the debt service but we will save money on the interest payments. I just want to make that clear to the people out there listening because that is an opportunity to decrease your debt.”

“If we only take nineteen and a half million not only will we save money on the debt service but we will save money on the interest payments. I just want to make that clear to the people out there listening because that is an opportunity to decrease your debt.”

– County commissioner Bill Lashley

“If we only take nineteen and a half million,” he told the rest of the county’s governing board, “not only will we save money on the debt service but we will save money on the interest payments. I just want to make that clear to the people out there listening because that is an opportunity to decrease your debt.”

“I would like to point out to the taxpayers,” added John Paisley, Jr., the chairman of Alamance County’s commissioners, “that if you take the premium, you also have to pay that back, and you end up increasing your debt.”

Yet, in the end, the commissioners gave the county’s administrators a provisional nod to move forward with a proposed bond issue on the assumption that they’ll accept as much revenue as the bond market is willing to bear.

Commissioner Craig Turner, who spoke up on behalf of this stance, insisted that it may be in the county’s financial interest to get as much cash as it can out of these bonds.

“We can afford [$21.7 million] with no additional taxes and no additional revenue, and that’s a conservative estimate,” he argued. “I don’t see why we don’t do that so get that going as soon as possible.”

The rest of the board ultimately acceded to Turner’s recommendation and instructed the county’s administrators to proceed with the bond issue, which Cole said could take place as early as May if the county acts quickly.


Read the newspaper’s editorial page opinion on the issue:  https://alamancenews.com/taxpayers-follow-the-commissioners-shell-game-carefully-because-its-going-to-cost-you-more-money/

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