07/05/11 — Second look sought for school projects

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Second look sought for school projects

By Steve Herring
Published in News on July 5, 2011 1:46 PM

A major $15 million renovation and construction plan for Eastern Wayne and Norwayne middle schools remains on schedule despite a down economy that is forcing the county later this summer to revisit and probably recast its $255.6 million capital improvement plan for fiscal years 2012-16.

The school board is expected to be asked to do the same -- to look at priorities and costs and at how the county can best utilize a dwindling revenue stream.

Bids on the school projects are expected back by the first of August, with contracts to be awarded by November and construction to begin as early as the first of January.

Commissioners have given no indication that the county won't follow through on the two schools despite the tight economy. However, the process that will unfold over the next several months does have built-in periods during which the board could decide to delay the projects.

The existing school projects in the county's capital improvement plan include $2.5 million "pay-as-you-go" capital through 2016 for schools for such projects as roofs. Also included are $8.9 million for Norwayne, $6.1 million for Eastern Wayne and another $1 million for mobile units.

Fiscal year 2013 projects $6.5 million for central attendance area schools, $3.85 million for Spring Creek Elementary and $6.6 million for Charles B. Aycock High School, while 2015 projects $35.4 million for Spring Creek High School and Grantham School.

Those are the projects that County Manager Lee Smith would like to see the school board re-examine.

"I gave out some options (to commissioners) and showed that if you add new schools or new buildings or new jail what the cost is to the operation budget," Smith said. "I have said it before, you might be able to afford a new car, but can you afford the tires, the insurance and the gas? You have to ask that question.

"I think you have to revisit it. I might be able to afford $5 million, $10 million or $20 million, but can I afford $35 million? Or do you say, 'No, the $35 million is important to do this Grantham School or Spring Creek,' and you do that and you don't do these others. Or you only do this much of these."

Smith said he will recommend that commissioners ask the school board to go back and revisit its facility priorities because school populations change annually.

"I am just saying that now everything is officially on the table and that is how I will present it to the board of commissioners," Smith said. "It is just a good opportunity to stop and ensure that good decisions are being made."

The recommendation should not be seen as any criticism of the school district's plan, he said. It is just saying "let's do a review," Smith said.

The review would address what the status of the schools plan is and whether the project is still needed, he said.

"Also is it enough money?" Smith said. "Can we do it for less? Right now prices are coming in a lot less than people anticipated around the state. So all of a sudden a $5 million project is $3.5 million. There is a million and a half that could go to this school. You could spend the same $5 million and get more done."

Smith said it just makes "good sense" to review the numbers, just like commissioners will be doing.

The county plans to sell $15 million in federal Qualified School Bonds for the Eastern Wayne and Norwayne middle schools projects.

The county will use lottery proceeds to pay the principal, and local funds for the interest. The federal government would reimburse the county at the end of each year, making the bonds interest-free -- saving the county more than $750,000 annually in interest and over 17 years, a total of more than $12.75 million

The bonds have to be sold before December or be forfeited. The county then has a three-year period to spend and complete the project.

"We are actually going to pay interest on our side of $700,000 to $800,000 and get reimbursed," Smith said. "I don't think using lottery money (on the interest) is very smart because you then have to technically pay it back. It gets a little gray so we will pay out of our dollars and get it back usually within five to six months."

Last month commissioners adopted a resolution to position the county to be able to be reimbursed for costs associated with the projects including expenses incurred before the Local Government Commission and other applications and banking bids are approved.

Smith said he could not think of early expenses, but the county wanted to be sure that it got the money back if there were any.

"There are steps we have to go through," he said. "First, the bids are out and due back Aug. 1. The bids are good for 90 days. In that process the county in July and August will set some public hearings for September. We are not going on the open market (to sell bonds).

"We are finding it is much cheaper for attorneys' work and those kind of things -- the bond market right now is still kind of soft in terms of rates. The banks are a lot more competitive in some cases or it is kind of a dead heat. That being the case, if I have less expense, I am better off going blank placement."

The county will hold a public hearing on the bank placement bids and another hearing will be held on the actual bond application, he said.

Commissioners have up until they sign for the bonds to cancel the project, Smith said.

"Once you do that it done," he said.

The county plans to seek Local Government Commission approval during the second week in October and the bids that will come back in August are good until the first of November.

He expects that if contracts are signed in November that construction could be under way by early January.

Smith said he had been asked about the mobile units, but that spending the $1 million for the units makes sense.

"You are already seeing some work because they have already ordered the mobile units," he said. "People say, 'What if it doesn't get approved?' They need to replace some mobile units anyway so I think they are talking about around the county replacing some mobile units. I think that will be fine. I don't think it will be a waste of money. They (school board) are already making plans as a school to get these projects moving.

"They have been advertised, the bids are out and will be back by August 1. That being the case, we will begin putting our documents together for, first of all, a bank bid. We are not going to going on the open market. We found that the rates and the cost on the open market are about 25 percent higher and the rates are about the same on the open market versus bank placement. So we are going to go competitive bid with bank placement."

Smith said that the county's financial advisers, bond attorneys and Local Government Commission had told the county that was the best option.

Commissioner Jack Best during last month's board meeting wanted to know what would happen if bids come in as expected on one project and too high on the other. Best said he did not expect that to happen because of the market.

"Can you divide the projects and do one and not the other?" he said.

"If you are using Qualified School Bonds money we would have to go back and amend, through the Department of Public Instruction, the project," Smith said.

Best then asked what if both projects come in too high.

"Do we just not do the one project?" he said.

"You have the ability to not do the project or fund another way," Smith said. 'You do not have to move forward. However, right now bids are coming in pretty good. We talked to DPI and couple of other counties and their projects are coming in under bid."