Majority of School Board members favor issuing debt to keep projects on track if governor signs bill designating more capital revenue for charter schools

Board members Eric Robinson and Bridget Ziegler voice opposing views

School Board members Caroline Zucker (left) and Bridget Ziegler prepare for the start of a workshop in 2016. File photo

Three of the five Sarasota County School Board members said this week that they would approve of the district’s issuing $30 million in debt to maintain the timeline for specific construction projects if Gov. Rick Scott signs a 274-page education bill that the Legislature passed in the final days of the 2017 session.

In the meantime, they also gave staff the go-ahead for projects planned in the 2017-18 fiscal year, even if they end up waiting until July to approve the district’s capital budget for the next five years.

Planning Director Kathie Ebaugh had sought direction on how to proceed, with some projects set to start on July 1, which is the beginning of the district’s next fiscal year.

The earliest the board would issue any debt would be the 2018-19 fiscal year, Chief Financial Officer Mitsi Corcoran said.

“We do not have too much debt, as you look around the state,” Chair Caroline Zucker pointed out during the nearly 35 minutes of discussion on May 16. She could not envision having to push back a number of projects, she added, including a proposed new $20-million classroom wing at Pine View School in Osprey.

However, board members Eric Robinson was blunt in opposition to the majority view: “I’m not a big debt person.”

Eric Robinson. Image from his campaign website

While board member Bridget Ziegler said she had concerns about further delay of projects such as the one at Pine View School, she nonetheless is “not crazy about COPs in general, without going out to the voters.”

Several years ago — in an effort to take advantage of lower construction costs in the wake of the Great Recession — the School Board used Certificates of Participation (COPs) to pay for projects such as the rebuilding of what is now the Suncoast Technical College in Sarasota. A COP is a type of financing in which an investor purchases a share of a local government’s revenues instead of a bond secured by those revenues. Local governments issue COPs to avoid limitations on debt that have been placed upon them.

House Bill 7069 would require all school districts to provide their charter schools revenue brought in by their capital millage rates. The formula the Legislature included in the bill incorporates each district’s current debt and property values in arriving at how much the district would turn over to the charter schools, Corcoran explained.

Although the Sarasota County district already has been providing some of its capital revenue to its charter schools, Corcoran noted during the board’s May 16 workshop that the bill’s criteria would raise the amount from about $3.5 million to $3.7 million per year to more than $10 million. Her figure did not include the potential for new charter schools opening in the district in coming years, she pointed out.

The impact of the bill, she continued, would wipe out the 7.5% district capital reserve fund and would still leave each of the five years of the next capital budget in the red, if no changes were made in the projects planned.

One alternative, she suggested, is for the district to issue $30 million in debt. The money could be used to build the next elementary school the district will need for growing enrollment, and then sufficient funding would be available for the projects already in the capital budget for the 2017-18 school year.

The three rating agencies in New York City rate the district very highly, Corcoran pointed out, “so our cost of debt will not be substantial.”

Chief Operating Officer Scott Lempe and Planning Director Kathie Ebaugh address the board in 2016. File photo

Scott Lempe, the district’s chief operating officer, told the board members he had discussed the situation a number of times with Superintendent Todd Bowden, who was not present for the School Board’s workshop that day. “You have been very, very prudent in your issuance with debt,” Lempe told the board members, “[so] you are effectively being punished by this law.”

“That is a true statement,” Corcoran concurred.

Because of its low debt and high property values, Corcoran added, she would expect the Sarasota district to be among those contributing the largest amounts to charter schools.

Ziegler and Robinson also objected to Lempe’s reference to the district’s being “punished” for its low debt.

The perception should be that the charter schools are public schools, too, Ziegler said.

If the district had more debt, Robinson noted, it also would have less cash flow.

Robinson suggested that the board focus on improving the quality of education in its schools, “so fewer students go to charters.”

Other options

In lieu of issuing debt, Planning Director Ebaugh discussed another capital budget scenario staff had developed in the event the bill becomes law.

It would call for the start of construction of the Pine View classroom wing to be pushed back by two years, she said — from the 2018-19 fiscal year to the 2020-21 fiscal year.

Graphics in the proposed Capital Improvement Plan presented to the board for the May 16 workshop include these details about the plans for the Pine View project. Image courtesy Sarasota County Schools

She and her staff already have been working with Pine View staff and its community, she pointed out, to get a clear idea of what their needs are in terms of the addition. “As the person who has been involved most heavily with the community,” she added, “I can tell you that they will not be happy if we let them know that we’re moving this out that far. This project has been in the budget for a number of years.”

“[The campus] really is loaded with portables,” Chair Zucker pointed out. “I can’t see moving [the project] out two years.”

Additionally, $10 million slated for the purchase of a new high school site for the east-central part of the county would be pushed back one year, from 2017-18 to 2018-19.

That change, Ebaugh noted, “probably has no real effect. … We haven’t found a site. Finding high school sites of that size [is] very difficult …”

Renovations of Emma E. Booker Elementary School in Sarasota and installation of new rubber tracks at the district’s five standalone high schools also would have to be delayed, Ebaugh said.

Finally, the North Port High science wing renovations would have to be undertaken over three years, instead of two, starting in the 2020-21 fiscal year.

Even with those shifts, Ebaugh pointed out, “we never know — we always have a group of new projects” that pop up and are added into the budget. Already, she said, an extra $11 million was put into the 2017-18 capital budget for such needs. “We clearly would not have that much capacity to meet current needs as they arise,” she added.

When Chair Zucker asked for clarification about what the board could do if it borrowed $30 million — if House Bill 7069 becomes law — Ebaugh explained that the money would cover the cost of the new elementary school, and the rest of the originally proposed five-year capital plan — except for use of the $10 million for the new high school site — would remain as it is.

Graphics explain tentative plans for the Emma E. Booker Elementary School renovations. Image courtesy Sarasota County Schools

“Maybe it makes sense to borrow the $30 million, regardless,” board member Shirley Brown said. That way, if House Bill 7069 does not become law this year, but legislators revive it in the 2018 session, the district would not be affected as adversely by the formula for charter school funding.

“I personally agree that we should borrow the money,” board member Jane Goodwin told her colleagues. “We have a real problem in mid-county with our elementary schools [in terms of growing enrollment].”

While she agreed with Robinson’s preference for keeping district debt low, Goodwin said, she also was worried about being able to undertake projects such as replacing roofs, as the board members have proven themselves “good stewards” on maintenance.

Brown noted that when the district used COPs for earlier projects, it ended up saving money by locking in the construction costs at a lower level. Furthermore, she pointed out, “we won’t be doing any debt unless we vote on it at the table,” referring to action taken in a regular session, not a workshop.

The board no longer has a contract with an underwriter to vet proposals for issuing debt, Corcoran explained; therefore, a new contract would be needed, if debt is the means board members would choose to resolve their funding issues. Pursuing a Request for Proposals for proposals and winning board approval of a new contract would take about three to five months, she added.

“I think you know the direction the board is going in,” Zucker told her.

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