On the face of it, SB554 sounds like a nice, innovative idea — leasing school buildngs under creative financing schemes to cash-strapped county systems around the state. But outgoing treasurer Janet Cowell is not sold just yet — and she may have a point:
Construction industry executives are pushing for a law that would allow Robeson and other cash-strapped counties to redirect state money used for personnel to help pay for long-term leases on new buildings they desperately need.
But the state treasurer’s office is sounding alarms, saying the proposal would benefit a developer while putting Robeson County at financial risk.
Senate Bill 554 would allow school districts looking to vacate old schools and build fewer new ones to enter into long-term leases and use money saved by consolidation to help pay the costs. Leasing is already allowed, but the proposal goes further by letting districts use state money that would have gone to pay custodians, clerks and substitutes to instead be used to help pay rent.
The state treasurer’s office is opposing the bill because it allows state money reserved for school employees to go to private developers. And it doesn’t like that a developer, Robbie Ferris, came up with the plan, is one of the bill’s most active boosters and is in a position to profit.
In a June 7 letter to legislators, Treasurer Janet Cowell said the bill could force Robeson to raise its per person debt burden from $202 to $4,694, the highest in the state.
“Allowing those who aim to profit from these plans to design the financing model is a bad deal for taxpayers and a conflict of interest,” the Democratic treasurer wrote.
Among her other objections are that the bill would allow the developers be paid before other county services, would assign sales tax refunds to a for-profit company, and would not require the county to open the operating lease to competitive bidding.[…]
Ferris, a veteran architect with oodles of school experience, is heading up a team that includes Metcon – a politically connected Robeson County building contractor. The bill’s main sponsor, senator Wesley Meredith, is a professional landscaper who has done business with Metcon. The group has hired Patrick Ballantine, the former Senate GOP leader and GOP gubernatorial nominee, to do its lobbying on Jones Street.
One of the best ways to evaluate a proposal like this is to look at the record. Let’s head south to Horry County:
Horry County Schools is considering several ways to pay for the five new area schools that should be completed by 2017, and the architecture firm is offering a payment plan that would cost an additional $7 million.
The district’s Facilities and Finance committees heard a presentation Monday from Robbie Ferris, CEO of First Floor Energy Positive, which is contracted to build the five schools.
Ferris’ presentation focused on “alternative” payment options, including a deferred payment plan that would net First Floor at least an extra $7 million over the already over-budget price of $240.3 million for the schools.
“The situation in Horry is unique, and we didn’t know everything about the district’s financial situation,” Ferris said. “So we thought it may be of value to them to hear several different payment options.”
Hmmm. Same architect. Same building contractor. Same developer. Budget overruns. Project delays. (Holy Cintra and I-77, Batman!) MORE:
[…] The alternative plan would create about $6,887,262 in extra costs and does not include any interest costs during the pay-off of the construction contract. Interest rates could range from 1 to 5 percent, depending on the market, Ferris said.
A few board members and district employees expressed hesitation at accepting Ferris’ proposal, instead opting for a traditional payment option.
“It’s my recommendation, as chief of finances, that we go with the traditional financing model,” said John Gardner, chief financial officer with the district.
Ferris said all the points and questions brought up by board and district members are valid, and he just wanted to make sure Horry County considered every option to finance the schools.
[…]Traditionally, the projects would be funded through a combination of general obligation bonds, equipment lease financing and sales tax funds, according to Gardner.
Equipment lease financing means the district can purchase items needed for the new schools – such as technology, HVAC units or kitchen equipment – and pay a lease over the useful life of the item, Gardner said. Because leases are not subject to the district’s 8 percent debt limitation, officials can “repay any debt or lease payments during the life of the Education Capital Improvement Sales Tax,” he said.
Ferris’ proposal extends the construction contract for nine years and allows the district to make quarterly or annual payments from sales tax revenue. The tax revenue is deposited into a lockbox and, after the lockbox has enough money for a payment, the tax money would be used for other district needs.
“One of the nice things about this option is that it would not tie up your 8 percent lending capacity, so you could use that money for something else,” Ferris said.
Gardner said the district already uses some of the 8 percent debt limits, but the majority of it would be taken up with the building projects. Though all of the debt capacity would be reserved, the district would pay off the bonds within nine years, he said.
Opting for an unsecured loan – such as the one Ferris presented – would probably mean a higher interest rate because it’s not backed by the “full faith and credit” of the district, Gardner said.
[…]Increasing the budget for the schools will not cut any other funding from current district programs or projects, Gardner said. However, additional projects in the short term facilities plan may “require additional funds upon their procurement and receipt of bids,” he said.
The cost to build the schools by First Floor Energy Positive – a firm based in Raleigh, N.C. – is $220.6 million, but emergency and work funds brings the total up to $240.3 million, according to documents from the district. The new figure comes from including “owner’s contingency” costs and estimated off-site work costs, which must be factored into the final price.
And, as a footnote, we’d be remiss in mentioning that one of Ferris’s true passions is “green” construction. Of course, that includes SOLAR. In lobbying for the bill and the Robeson County work, Ferris has been pointing to the “success” of a Hoke county school his team completed. (That school, as detailed in the linked article, is solar-powered.)
And we ALL know that North Carolina has one of the most generous solar subsidy packages in the nation. This bill presents an opportunity for at least THIRTEEN new schools that will be a captive audience for the solar goons for decades.