Halifax County Board of Supervisors decided when they met Monday to move forward with borrowing $110,250,000 for a new Halifax County High School.
They decided to put the borrowing for elementary needs on the back burner for now, until they get a plan from the Halifax County School Board.
Requests for the board to make a decision on elementary needs have gone unanswered for months. No further action has been taken by the school board on addressing elementary needs following a series of public hearings that were held in the fall.
Supervisors had previously decided they could reasonably borrow $135 in two borrowing notes with $100 million paid for with the 1% sales tax and $35 million paid for using the county’s debt service.
The county currently has roughly $23 million in school debt that is set to expire in 2027, and they plan to use some of that towards this project.
The goal is to spend $109 million for the high school project using $100 million from county funds and $4 million from in ESSER funds, which are COVID-relief federal funds received by the school board that can be used towards the school project. Another $5 million is for contingency.
Supervisors had decided they could borrow $25 million for the elementary school.
But, bond counsel had previously informed county administrator Scott Simpson, in order for them to receive the funding for the elementary schools, they had to provide information on how they plan to use the funds.
Before supervisors on Monday was a resolution authorizing the issuance of “not to exceed $141,750,000 General Obligation School Bond” to be sold to the Virginia Public School Authority.
Included in the resolution was funding amounts for the high school and potential elementary school projects as well as a caveat for the interest rate not to exceed 5.50% per annum.
Vice chair Garland Ricketts quickly suggested supervisors pull the information from the document about the elementary schools and change the total amount to reflect the new total cost. He also suggested they lower the interest rate caveat to 4.5%, as a way to ensure that no additional tax dollars are needed to repay the loan.
But, ED-8 supervisor William Bryant Claiborne feels that there will be some type of elementary school project within the next few years, and he thinks now would be the best time to borrow the money due to low interest rates.
He also said he had spoken with a representative with the Virginia Public School Authority who told him that they do not need “a specific plan” to borrow the money for the elementary schools.
“This is the best time to borrow that money,” said Claiborne.
He also said, “We know we have to do something” with the aging elementary schools, and he said if they don’t act now, the price tag for renovating elementary schools could escalate to $40 million in the next few years.
Simpson once again reiterated the advice he received from bond counsel saying because the school board “has not made a decision on the elementary schools, the amount cannot be $135.”
The intent of the resolution before supervisors was to authorize borrowing an amount not to exceed $141,750,000, with the objective of providing $135,000,000 for a high school and multiple elementary schools known as the “Projects.”
ED-6 supervisor Stanley Brandon reminded the board they had until April 4 to make a decision. Supervisors have until April 6 to adopt the resolution/ordinance authorizing the bond issuance and execution of the Bond Sale Agreement. The resolution must be submitted by April 7.
Supervisors already plan to meet on March 21 and April 4.
Scott also explained to supervisors that, “Reality is we have to dip into new revenues in order to afford anything above 4.5% (interest rate).”
He said interest rates have increased a half of a point in the past month and are “creeping up.”
“The guidance I’ve been given is if we stay at $135 and go to closing, and bond counsel can’t certify then they no longer become tax exempt bonds. We could still borrow them but they become a taxable bond and interest rate goes up a couple percent,” said Simpson.
The board then heard from Mitch Brigulio, an analyst with Davenport & Company LLC, who is a financial adviser to the board.
He informed supervisors that they needed to decide on the principal amount, the interest rate and the term of the final maturity. As it stands, the life of the loan will be 30 years. He also provided information on the current interest rate market saying interest rates had increased from .5% in January to now above 2%.
Brigulio provided supervisors with an analysis to see what they could afford using the projected sales tax funds and debt service.
The financial adviser told the board that if they borrowed $105 million then the total payback would be $153.8 million.
He said supervisors can fund about $95 million using the projected funds from the 1% sales tax.
The remaining $10 million would have to come from the school debt service, he added.
He also noted that that was under the assumption that the sales tax would accumulate $3.6 this year and grow at a 1.8% inflation rate.
Brigulio also advised supervisors to “combine” the sales tax funds and the funds from the school debt service or else they would need an additional $600,000.
“That’s one approach to help fill the gap,” he said. He also noted that Davenport would still be able to track the spending of the funds separately and report on that.
He also told supervisors that a 4.2% to a 4.25% interest rate was the “break even point” of what they would not be able to afford.
“Keep in mind this is only looking at $105 million,” said Brigulio.
However, he said the board could “handle” repaying the $110 million.
ED-6 Supervisor Brandon asked how long would they be collecting the 1% sales tax.
Simpson told Brandon the legislation is written for 20 years or the length of the loan.
He said since they’ve been collecting sales tax for two years, supervisors have 28 years left.
ED-3 supervisor Hubert Pannell urged supervisors to table the decision to give them time to “make sure they get things right.”
In the end, Ricketts reminded the board that they should only take on an obligation for which they have the resources to repay.
“This in no way keeps this board from a second borrowing,” said Ricketts.
He reminded the board they could do a second borrowing for the elementary projects after the school board decides on a plan.
But, Claiborne said they should “respect” the school and give them this information before approving it.
Ricketts responded saying, “We are their funder.”
Ultimately, supervisors unanimously approved a motion by Ricketts to approve the amended resolution to borrow the funds for only the high school.
Claiborne then clarified the reasoning behind his yes vote saying he only voted for it because it's still possible for them to borrow money for the elementary schools in the future.