The Orcas school board is not looking favorably on its option to sell up to $11 million in non-voted bonds to pay for building repairs after hearing the potential details from financial advisor Trevor Carlson at a March 3 meeting.
“You’re holding (the public) hostage by the actions you take today if you choose non-voted debt,” Carlson said. “There could be negative political ramifications down the line.”
Carlson, the Senior Vice President of Seattle Northwest Securities, laid out the terms of various options the board could choose, including amounts of interest, length of loan and repayment terms.
“No matter how you dice it, we’re looking at $400-500,000 a year in interest and payments, which would have to come out of the general fund, which translates into a lot less teachers or staff, and there is no wiggle room on the budget,” board member Chris Sutton told the Sounder.
The district has received permission from the state government to incur up to $11 million in debt through the sale of non-voted bonds, which they would need to repay in the future, possibly through a capital levy or a voted bond. They discussed with Carlson the possibility of selling between $1.5 million and $6 million in bonds.
If the district fell behind on loan payments, Carlson said bond purchasers would begin lawsuits, the state would step in to run the school district, and “you would never be able to issue bonds ever again.” While the state of Washington co-signs voted bonds for schools, he said non-voted debt is essentially “an unsecured loan.”
“These sound like more of a pain in the butt than they’re worth,” said Sutton after hearing all the details. “This has just got ‘bad’ written all over it.”
“To offer this, the federal government must be thinking this is a great idea,” added board chair Scott Lancaster. “What’s the great idea?”
Carlson replied that schools rarely resort to non-voted debt.
“I like the revenue source [to be] in place before you begin making big commitments,” he said.
The board is examining all funding options because the district has been offered $900,000 in federal grant monies to make repairs to the school. To secure the grants, they must come up with $72,000 in matching funds. There are presently three grants on the table: one for high school repairs and two for elementary school repairs, with some overlap, said Kline.
The board discussed needing $1.5 million (on top of the grant money) in order to make the necessary repairs, but the numbers are not final.
Later on in the meeting Kline mentioned her “vast disappointment in listening to how difficult it would be to put some money into the community,” and expressed concern for the community as several elementary school families have moved off the island, unable to afford to continue living on Orcas.
When asked for an update on his planned series of forums about the school bond issue, Fred Klein said he had 35 “courageous souls” signed up, but is still hoping for more to add a greater level of diversity to the group. He said working parents are especially underrepresented in sign-ups thus far.
In other school news, the board approved termination of Ben Thomas’ business manager contract and increased business manager Keith Whitaker’s position from .6 to full time, at a cost of $19,000 more and a 38 percent benefit allowance. Jim Sullivan and Tony Ghazel voted against the measure.
