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HomeMy WebLinkAboutAgenda - 09-17-1996 - 5a 1 Orange County Board of County Commissioners Action Agenda Item No Action Agenda Item Abstract Meeting Date: September 17, 1996 Subject: Resolution of Intent - Long-Term School Capital Financing Plan and State School Bond Support Department: Budget/County Manager Public Hearing: Yes No x Budget Amendment Needed: Yes No x Attachment(s): Information Contact: Options for School Capital Financing Sally Kost, ext 2151 Option 5 Spreadsheet Telephone and Extension Number Resolution Hillsborough 732-8181 8/23/96 NCCBI Memo Chapel Hill 968-4501 Durham 688-7331 Mebane 227-2031 Purpose: To consider adopting a resolution indicating the intent of the Orange County Board of Commissioners to 1) implement a plan for financing long term capital needs for the Chapel Hill-Carrboro City Schools and the Orange County Schools, and 2) support passage of the $1.8 billion Statewide school bond in November, 1996. Background: At the September 3, 1996 meeting, the Board of Commissioners requested County staff to refine the school capital options financing plan that was presented to the Board of Commissioners at the August 20 meeting. The Board also discussed the importance of being able to demonstrate how the County's long-term plan for school capital financing is related to, and dependent on, successful passage of the Statewide school bond in November. The plan presented at the August 20 meeting included various options for school financing. Based on the Board's discussion, this follow-up report refines Option 5 of the original report as Option 5A, which at this time would not require an increase in the County's ad valorem tax rate. Options 1 through 4 have not changed and are shown in Attachment 1 of this abstract. One adjustment to the plan as originally presented to the Board of County Commissioners is that revenue estimates have been updated. Option 5 was originally presented based on revenue estimates made in Fall 1995 as part of the development of the 1996-2006 Capital Improvements Plan. Note that these revenue projections have been updated based on more current information and will be updated again as part of the development of the 1997-2007 Capital Improvements Plan. s • 2 ' The principal components of Option 5, as presented on August 20 are as follows: 1. New Facilities • Chapel Hill/Carrboro City $14.1 Private placement with$5 million borrowed Fall Schools Elementary million 1996; $9 million borrowed Fall 1997; balance School#8 Impact Fees • East Chapel Hill High $11.8 State bond funds($10,995,840); Impact Fees School Addition million ($804,160) • Chapel Hill/Carrboro City $22.5 County-wide bond referendum($20.7 million); Schools Middle School million balance Impact Fees • Orange County Schools $14.5 State bond referendum ($5,980,160), Countywide Elementary School million bond($7,466,297);balance Impact Fees. The proposed County bond referendum also includes $5 million which could possibly be used for park, County and affordable housing projects. 2. Debt Service All debt service, including both general obligation bonds and private placement payments would be paid from funds prior to allocating between the County and Schools. Currently funds are allocated between the County and the Schools, and then general obligation debt service is subtracted from the allocated amounts. After the funds are allocated to each school system, the private placement payments are made. 3. Funding Sources The source of funds currently used for financing School and County capital projects and debt service on those capital projects would continue. These are: • Sales Tax - all one half cent sales tax revenue (estimated to be $7.5 million in 1997-98) • Property Taxes • The present equivalent of 2.8 cents on the property tax rate for debt service on the bonds authorized in 1988. • $800,000 for debt service on School debt authorized in 1977 with the balance of these funds used for on-going School projects; • $1.5 million for recurring capital (see option 5 A below) • Debt service on the 1992 School bonds (for 1997-98 this is $4.7 million); • Utilities Extension Fund ($25,000) and Human Services ($50,000); • Impact Fees - Estimated revenue in 1997-98 for Orange County Schools is $344,250 and for the Chapel Hill/Carrboro City Schools $1,100,000; • North Carolina Public School Building Fund - $600,000 in 1997-98; • Miscellaneous Revenue- including payment-in-lieu, rental income, jail fees, State funds. 3 As the amount of outstanding debt paid from property taxes is retired and the annual amount of the debt service payment is reduced, funds would continue to be earmarked for school capital at the 1999-2000 peak level. Debt service payments decrease by around $360,000 each year. For years presented in this plan (through 2005-06) these funds are allocated to the Orange County Schools. For years beyond those shown in this report, one option is to allocate these funds to each School system based on average daily membership (ADM). 4. On-going School Capital Projects (projects other than those listed in #1 above that are included in the Capital Improvements Plan) The proposed bond referendum includes about $6.8 million for ongoing School capital projects. In the present Capital Improvements Plan, the private placement payment for the Chapel Hill/Carrboro City Schools Elementary School #8, the addition to East Chapel Hill High School and the debt service on the new Orange County Schools elementary school is paid from capital funds after the funds are allocated. In Option 5 all debt service is deducted before funds are allocated to the County and to the Schools. In comparing the impact of Option 5 to the Schools' capital plans, the bond proceeds and private placement financing are excluded. What remains are on-going capital projects. Attachment 2 compares existing funding to funding that would be available under Option 5. This comparison shows that over the nine years included in the planning period, Chapel Hill/Carrboro City Schools would receive $2.5 million less than under the present Capital Improvements Plan. The Orange County Schools would receive about $4.1 million less than under the present Capital Improvements Plan. A variation of this option is also shown at Attachment 2. In Option 5A, recurring capital is excluded from the calculations. Recurring capital in this plan would be paid from the General Fund and is equivalent to roughly three cents on the property tax rate. In this option, the equivalent of three cents on the property tax rate is specifically earmarked for recurring capital, with funds allocated to each School system based on student membership. Growth in recurring capital funding would be equivalent to growth in the tax base. Shifting recurring capital outside the capital formula adversely impacts County projects. Over the nine year planning period, County projects would total around $5.5 million less than the amount currently in the Capital Improvements Plan. The first year of hardship for County Capital Improvements Plan projects would be 1998-1999. There are several possible options: • Shift the one cent currently earmarked as a Capital Reserve Fund to County projects. By 1998 this Reserve Account will have a balance of just over$1.5 million. • Increase the General Fund property tax rate by one cent in 1998- 1999 with these funds earmarked for County Capital projects. • Adjust the allocation of the Schools and County from the 50-50 split. To hold County projects "harmless" the allocation would need to be 67 percent for the County and 33 percent for the Schools. This would reduce the amount available for the Schools over the nine year 4 � planning period by $3.2 million for Chapel Hill/Carrboro City Schools and $2.3 million for Orange County Schools It is the first option, shifting the one cent currently earmarked as a Capital Reserve that is shown in the table in Option 5A at Attachment 2. 5. Citizens Committee This funding plan assumes an assessment will validate the need for these facilities. The Board may wish to appoint a Capital Needs Advisory Committee, similar to the committees leading to the 1988 and 1992 bonds, to study both School and County capital needs. 6. Statewide School Bond The Statewide School Bond, if approved by North Carolina voters, would provide nearly $11 million for the Chapel Hill-Carrboro Schools and about $6 million for the Orange County Schools for long-term school capital projects. The Board of Commissioners has informally discussed the importance of the Board's support for passage of the Statewide school bond. The Commissioners have indicated the desirability of working with the Orange County and Chapel Hill-Carrboro Boards of Education to develop a steering committee of local citizens who will promote efforts to educate voters about the issues underlying the Statewide school bond. Staff discussions with the two superintendents indicate that neither Board of Education has yet taken formal action on education about, or support for, the Statewide school bond. However, the Orange County Board of Education is scheduled to discuss this matter at their September 16 meeting, and the Chapel Hill-Carrboro Board of Education is also expected to discuss the subject in the near future. North Carolina Citizens for Business and Industry (NCCBI) have announced their campaign to promote passage of both the School and Highway bonds (see NCCBI memo dated August 23, 1996). The Board of Commissioners may wish to formally signal their intent to work with the two school boards, parent-teacher organizations, and other interested parties in Orange County on educational efforts that would complement the promotional efforts of NCCBI. Recommendation(s): The Manager recommends that the Board of Commissioners adopt the attached resolution.