TCS board considers refinancing amounts
Published 9:23 pm Thursday, November 18, 2010
The Troy City School Board has scheduled a meeting Monday to set a dollar amount for much-needed funds through a leasing agreement with the Educational Bonding Authority. The funds — from $4.5 million to $15 million — will be gathered through bond financing and would go to capital improvements.
At a work session Thursday night, board members met with Educational Bonding Authority member Marcus Paramore, Chief School Financial Officer Mickey Daughtry and investment banker Randy Rushton to discuss potential “worst-case scenario” budgets under various funds received, up to $15 million, and analyze the incurred debt value.
No items were voted on at the session, but the meeting gave the board members enough information to vote Monday.
The Troy City School system has maintained a relatively stellar fund balance, compared to other school systems in the state, of $9 million. With a $20 million budget, the school system could theoretically survive off the reserve for six to seven months without any income at all, said Dr. Judson Edwards, Troy City Schools board member and Dean of the Sorrell College of Business at Troy University.
In other school systems, the reserve is less than 30 days, Edwards said.
Even with highest debts incurred from seeking $15 million in funding from bond refinancing the system has a fund reserve of five years to seven years.
In other words, even after borrowing millions, the school system could wait for years without having to dip into its reserve.
Now, with interest rates at their lowest and construction costs down, the time to refinance and borrow couldn’t be better, Edwards said at the session.
With a 50-year-old high school, a 40-year-old middle school and a 20-year-old elementary school, renovations and even new building needs are within the near future.
“Really, the timing is perfect,” he said.
To wait any longer for the funds would risk losing an ideal market, he added.
“When do we start taking away from the kids by keeping it in the bank?” he asked at the session.
Even with $15 million funds, the debt percentage for the school budget would likely be close to 8 percent, Edwards said.
“As a percentage, that’s really good,” he said. “I feel real comfortable with that.”
With fast action — like the vote on Monday — the money could be in the bank by January, banker Rushton said.
And there’s no time like the present, according to Edwards.
“If construction picks up at all in the next year or two, you’re going to see prices go through the roof,” he said.