Explainer

The City School Bond Decision, Explained

An in-depth look at where the $8.6 million can be used.

When the County Commission approved the $32 million bond in October, our community knew that $17.6 million of it was for the new Blanche elementary school with an additional $5.7 million for a new STEM (science, technology, engineering, and math) wing at the county high school. The Commission sent the remaining $8.6 million to the city school system, which was earmarked by state law for for a few specific uses.

The question facing the city school board and really, the entire community, is deceivingly simple – where is that money best put to use?

To make the best decision, let’s take a look at where things stand currently and how we got here.

Where It Started

The best way to see the current lay of the land is to follow the money. To do that, we’ll head back to October 2011.

The City of Fayetteville issued $6 million in General Obligation Capital Outlay Notes, which was used to fund capital improvements to the elementary and middle school facilities. To back up those Notes, the City pledged its “ad valorem taxing power”, essentially its ability to increase taxes if needed, to pay.

Fast forward 16 months to February 2013, the city government and city school board signed what’s called an “Interlocal Agreement”. The two boards decided to refinance those Notes by converting them to bonds. Bonds and notes have a lot in common with the difference mostly being in the maturity length, which is the length of time the debt is repaid. Notes usually have shorter terms than bonds. When the Notes were converted, the city issued $6.125 million in bonds. If for whatever reason you find yourself looking at a schedule of debts held by the city, these bonds are called the “General Obligation Bonds, Series 2013”.

As of the last fiscal year, that bond sits at $5.09 million with payments each year totaling around $350,000. That number fluctuates a bit each year as the principal payment increases and the interest payment decreases. For the next few years, that debt payment schedule looks like this:

  • 2018 – $215,000 principal payment with $142,100 interest payment
  • 2019 – $220,000 principal payment with $137,800 interest payment
  • 2020 – $225,000 principal payment with $133,400 interest payment

If that schedule is kept, the debt is repaid fully in 2037.

Where We Are Now

As of the last public audit, the city school system ended fiscal year 2018 with $3.785 million in its General Fund, which is money that can be used for any expenses that schools need. That General Fund expenses cover everything from school instructional programs to salaries to building maintenance and debt service.

With the city’s portion of the county’s October 2018 bond, the school system received $8.6 million. But with that money came a few restrictions. Most importantly, this money can only be used for two types of expenditures – capital projects or debt retirement.

Here’s Tennessee Code § 49-3-1004 (2017) for that restriction:

“(a) The proceeds from the sale of school bonds issued under § 49-3-1002 constitute a special fund to be known as the special school fund, except funds for aiding this state in the construction of state education facilities or institutions as provided for in subsection (b), which shall be kept by the trustees of such county and the treasurer of the city schools separate and apart from all other funds and shall be applied exclusively to purchase property for school purposes, to purchase sites for school buildings, to erect or repair school buildings, to furnish and equip school buildings and to refund, call or make principal and interest payments on bonds or other obligations previously issued for the same purposes, and to be used for no other purposes by the county board of education of the county, the city board of education or the governing board of the city. The city board shall have a right to draw warrants on the funds only for the purposes mentioned in this subsection (a).” [Emphasize mine]

To put that into easier language – building construction or repairs would fit under this. Replacing or purchasing school equipment qualifies. Paying off the outstanding $5.09 million would as well. Using this money for anything outside of that isn’t allowed by state law.

The Early Possibilities

As with many decisions our community faces, there’s a few different routes for using the $8.6 million. The options below were compiled through interviews with school employees as well as public officials from both the city and county government. School officials are still in the early parts of the decision-making process so keep in mind that these are just early options.

Cosmetic and Safety Upgrades

This area includes repainting classrooms, removing carpet in favor of tile floor replacements, and replacing water fountains and gym showers. Entrances at the schools could also be upgraded to be more secure. We’ve seen the county school system take similar steps in entrance upgrades after the Parkland school shooting.

Chromebooks

Research shows that 1:1 laptop programs can lead to higher test scores and promote 21st-century learning skills. City schools currently use Chromebook carts to boost educational curriculum but those are shared between classrooms. They would need an additional 571 Chromebooks to bring their total count up high enough where each 3rd to 12th grade student could have a dedicated laptop.

Ralph Askins Traffic

In August 2018, the Board of Mayor and Aldermen asked the city schools leadership to look at options for improving safety along the streets by Ralph Askins Elementary. Options in this area range from street changes to a new parking lot.

High School Addition

There’s several portable classrooms in use at the moment, mostly used for Career/Technical Education (CTE) classes. A new addition, possibly coupled with a new gym, could provide space for those classes, along with Comprehensive Development Class (CDC) classes, while eliminating the need for the portable classrooms.

As we’ve talked about before, CTE training is vital for our community. When we have successful training programs, it’s easier for our residents to find jobs and for outside businesses to set up shop in our community.

Debt Reduction or Elimination

The $8.6 million would completely pay off that outstanding $5 million debt and leave $3.6 million for other options. If paid off in full, this frees up the roughly $350,000/year currently going towards the debt service, which is money that can be used for anything the school system needs rather than restricted to capital projects. Partial amounts of that debt could also be paid to free up some of that money currently going to bond payments.

This option carries through to city government choices as well. Remember, the City of Fayetteville is on the 2013 bond series. If the $5 million debt was retired, the city government itself would have even more freedom to explore new capital projects that might require issuing bonds.

What’s Next

Here’s where the community comes in. It’s easy to get lost in all of these big million dollar numbers. But these are our tax dollars being spent. A dollar (or a few million) spent in one place ripples throughout other decisions to be made. It’s critical to look at the overall picture when making decisions of this magnitude.

For now, $5 million of the total $8.6 million was invested into a CD earning 2.25% interest – that’s $112,500/year. The city school leadership along with the school board have asked an architect to start drawing up plans for the bigger projects. That’ll bring actual numbers for those discussions around traffic improvements and CTE addition. And remember – these options are all preliminary so they’ll change as the decision-making process goes forward.

The city school board and the aldermen were elected to make those decisions on our behalf. To do that, they’ll look at all the facts you just read. They’ll consider their own expertise and experience. And they’ll listen to what the community has to say.

The best way to share your thoughts and ideas is to contact our elected officials that will vote on the variety of choices. You can find the city school board officials here.

8 comments on “The City School Bond Decision, Explained

  1. David Mingia

    Okay okay… you got me to look at the debt schedule. I am still amazed at the solid financial position this community is in. I have more questions than answers. What are the needs (not wants) of the city school system? Student projections? Local industrial/professional needs? How well are the schools communicating with the Industrial Board? ***** It looks like we are in a position to either maintain solid footing OR make a broad brush stroke. Or am I missing something? Thanks again for this forum!

    • Great questions! I’ll have Dr. Janine Wilson, the director of city schools, on the podcast in an upcoming episode. I’ll make sure we cover those in that interview!

  2. This is a phenomenal and in-depth explanation of the background, bond requirements, and choices the School Board and the Board of Mayor and Alderman have. Great job.

    Anyone that has any financial experience knows that paying interest on borrowed money instead of paying for projects out of capital funds when you have adequate funds to fund it makes no sense. It also adds +/- $350,000 PER YEAR to use for any needed expenses like:

    -More teaching assistants to help with remedial instruction to help move the needle on the AMO’s.
    -Increase teaching materials for teachers.
    -Provide text books or programs that are current and match the grade level teaching curriculum.
    -Provide teachers with new technology to help them teach with state off the art tools that help students and teachers learn how to make learning fun and more interesting.
    -Provide students with more teachers for after school study classes.
    -Provide more money for more coaches.

    Paying off the bond is one of those “Duh!” decisions.

  3. Thanks so much for the detailed explainer! It really helps to see what our school officials are considering. I know they’ll have the best interests of the students and teachers in mind. And personally, I wouldn’t mind seeing some of those carpeted classrooms go. I can’t keep carpet clean in my own house much less in a classroom full of students!

  4. Rossy Williams

    If you can remember, the city tax payers voted down the proposed bond issue for the development of the City High School by 70% voting it down. The school board along with the City Fathers still found a way of ramming it down our throats by finding other methods of funding to developing the new high school. In the public meetings to inform the tax payers of how the City was going to repay this Bond Issue, one of the main ways was the projected increasing amount of students that every year would attend the city system, which would mean more money coming from the state each day for each student. That projected increase in student attendance of the city high school instead of the county high school has failed to meet the projections sold to the tax payers in those meetings. Thus, the need for more funds to meet the needs of the city school system are knocking on our doors once again. I would prefer as a tax payer we used all available dollars to pay down the debt owed and learn to live within our means.

    Also, it was projected and sold that the “STEM” curriculum that was going to be initiated would bring our student test scores up to a respectable level. Last year our city school system ranked last in the state in test scores. Thus, with enrollment not to the projected level after a number of years (meaning loss of revenue/day from the state) and low test scores, I would like to see us use if not all, a major portion of the “new found money” to eliminate a large part of our debt. Maybe then we as city tax payers will not have to experience the increase in our property taxes.

    I do applaud someone for the above explanation of the options and some past history. Thank you.

  5. Jim Martone

    I’ve seen the test scores thought come up a few times when talking with people around the city and county. Here’s the numbers I found on the Department of Education’s Report Card website.

    City High School vs County High School for 2016 – 2017
    Average ACT: City 20.0 | County 19.9
    ACT 21+ : City 41.7 | County 40.4
    TNReady HS ELA: City 43.3 | County 47.5
    TNReady HS Math: City 23.2 | County 32.5
    TVAAS Literacy: Both at Level 5
    TVAAS Numeracy: Both at Level 5

    You can see those numbers along with comparisons to previous years at https://www.measuretn.gov:444/ReportCard/Main/CurrentReportCard#/

    To me, those state tests look to be pretty similar for both high schools, outside of the 10 point lower score for the city high school in TNReady HS Math.

    Overall, I’m in favor of the money being used across all of those options (and there’s probably more ideas that’ll come up as this process goes forward). Use some to pay down the bond, some to update the classrooms, some to bring in the new Chromebooks. I don’t know much of what can be done over at Ralph Askins traffic congestion wise since it’s been rough for as long as I can remember. But that’s what this process is for – to explore all the options that are feasible. This doesn’t have to be an either/or conversation – either pay off the bond or don’t. Instead, let’s use that money in a wide, well-thought out way, which I’m sure the school board members will do.

  6. Janine Wilson

    Thank you, Jim Martone, for backing up your comments with facts. Our test scores are comparable and the 10-point difference you mention is because we offer Algebra I in the 8th grade which we choose to do knowing it will adversely affect the scores. The city system has never caused an increase in property taxes. We can prove that our targeted projections were not only accurate but, at the high school, have surpassed projections, and we have paid every bond payment from school system funds-not city coffers. After 10 successful years, isn’t it time to let this go and take pride in the accomplishments of our students?

    No decisions have been made about the expenditures of the capital funds, but since we have a very knowledgeable and honorable school board that always makes decisions based on what is best for children and our community, I am certain that the decisions will be ethical. Give us time to make sound decisions instead of jumping to conclusions, and it would be nice if everyone would post factual information instead of inflammatory opinions.

    • Laura Redding

      It’s good to see the school director jumping into this conversation. Thank you for contributing to the dialogue!

      I must say I was one of the voters that checked the “no” box on that proposed bond issue years ago. And I wasn’t happy to see how things played out afterwards. I still harbor reservations about our small county having not one, not two, but three different high schools. But after all these years, it’s safe to say that this is the status quo for the foreseeable future. I can accept that.

      Our students deserve the best education we as a community can provide. They’ll be the ones leading Fayetteville and Lincoln County before we know it. That means working together – as one FLC – to help prepare them as best as we can. Our city school board members should work hand-in-hand with county school board members. Our county commissioners should be working with city aldermen. We’re all in this together so let’s put in the work and move forward as a team.

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