Wayne officials ponder bonds for schools
By Andrew Bell
Published in News on June 25, 2006 2:07 AM
Wayne County Commissioners and members of the county Board of Education are pondering the idea of selling bonds to raise money for school construction but have not commited themselves to that financing method.
Commissioners have the authority to place the issue on the ballot, but the county's voters would have to say yes to the initiative.
With both boards still struggling to come up with a building plan that would address the school's structural needs, no one has put forth a proposal for a referendum on the issue.
Commissioner Atlas Price, a former school board member, said the commissioners and the school board have entertained the idea of a bond referendum, but both boards are keeping their options open. The two groups are still involved in trying to agree on a budget for the school system for 2006-07. Talk about building needs is linked to other school needs, Price noted.
"There could be no avenues, and there could be plenty of avenues for what happens next. We'll just have to wait and see when we open this thing up," Price said.
Commissioners and the school board plan to form a master committee soon to figure the costs of improving and building new schools and to determine the county's options for financing the projects.
County Attorney Borden Parker said the committee's first goal would be to determine how much money would be needed. State government officials advise local governments on how much money they can safely borrow.
Wayne County Manager Lee Smith said the county taxpayers are concerned about wasting money. To get the public to support the sale of bonds, he said, the two boards would need to come up with a reasonable amount and work to ensure that the schools' needs are understood by the voters. Taxpayers can then go to the polls and decide for themselves if they want to finance the projects, Smith said.
The last time Wayne voters had to decide on the sale of school bonds was in 1990, when they approved the sale of $13 million in general obligation bonds. Of that total, $11 million was earmarked for school construction. The remaining money was used for water district lines and economic development at the county's industrial park.
School officials have told commissioners that construction needs are dire. They also have noted that the longer the county waits, the more expensive construction becomes.
Parker noted that if the referendum is approved, the voters will have obligated the county to pay the debt. That means that if the county comes up short on a payment, a judge could order the commissioners to raise taxes enough to cover the debt.
Another option -- a certificate of participation -- is a contract between the local government and the entity or entities providing the revenue to pay for construction or whatever is needed by the local government. A contract is the local government's pledge to pay the money back, plus interest, but the obligation is not legally considered debt. If the debt is not paid, the entity that provided the money can foreclose on the mortgage of the building and choose to do what it wants with the structure.
Parker explained that when the joint committee decides on what will be included in a bond proposal, the commissioners would then notify the state Local Government Commission, a branch of the state Treasury Department that advises local governments. Before a bond referendum is placed on the ballot, the commission must give its approval. It then oversees the sale of the bonds.
North Carolina law requires a county to reserve a certain portion of its total budget to keep a respectable credit rating and to have a lower interest rate if the county decides to issue bonds. Wayne County officials have been building up the county's reserves for several years to prepare for any future capital improvement projects.
"Because of the bond rating, it is important for a county to be in sound fiscal condition and this county is in sound fiscal condition," Parker said.
In the event of a bond referendum, Parker said the county could choose to pay off part of its debt through its reserves, but most counties do not use that method because it has a negative effect on the county's bond rating.
Financially, the commission must also determine what kind of collection rate the county has and the procedure the county has in place for managing its own debt.
The Local Government Commission would have an underwriter for the bonds so that the commission can decide the best possible way to market them. Parker said the commission could choose to allow as many banks as necessary to underwrite the bonds.
Parker said a bond order would have to be issued 30 days before the vote, which allows residents to lodge objections.
A public hearing held before the vote would give residents a chance to express their opinions before going to the polls.
The bonds would need to be sold within seven years, but a county can ask for a three-year extension if needed, Parker said.
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