From the 12.19.12 edition
By Jack Durham
Amid a state-wide controversy over how some school districts are spending too much on bond financing, the local high school district board approved the issuance of $5 million in new bonds last week.
The Northern Humboldt Union High School District Board of Trustees voted unanimously at its Dec. 11 meeting to pursue $5 million in bonds to remodel and expand the multi-purpose room at Arcata High School. The bonds will be paid for by the residents of the district, which includes Orick, Trinidad, Westhaven, McKinleyville, Fieldbrook, Blue Lake, Arcata and Manila.
The bonds are authorized by Measure Q, a $25.8 million general obligation bond approved by voters in 2010. So far, the district has obtained $8 million in bonds. With last week’s decision, NHUHSD staff will now begin shopping for the lowest bond rates, and may be able to complete the deal to obtain $5 million by the end of January. That will bring the total bonds obtained by the NHUHSD to $13 million. The remaining $12.8 million called for in Measure Q will be pursued in future years after the current list of projects is near completion.
Measure Q has an estimated property tax assessment of $19 per $100,000 of assessed value per year. The assessed value is determined by the county and is not the same as market value.
Although the estimate is $19 per $100,000 of assessed property value, the actual tax depends upon the bond financing and how much is owed by the district. The current tax is about $11 per $100,000, which is less than the estimate.
Former NHUHSD Superintendent Kenny Richards, who retired last Friday, said that the district is striving to keep the assessment at $19 or less. However, under state law, the assessment could go as high as $30. Richards said that the district does not anticipate this happening.
This year the district upgraded the electrical and communications systems at both Arcata and McKinleyville high schools.
This summer the district will upgrade the bathrooms at the gyms at both high schools. School libraries at both campuses will also be remodeled and upgraded. The old bleachers at McKinleyville High School will be replaced.
The new $5 million in bonds will be used to remodel and expand the multi-purpose room at Arcata High. The 60-year-old structure is too small for the Arcata-McKinleyville Orchestra, which has to rent other facilities when it holds concerts, Richards said.
The NHUHSD will begin designing and planning for the new multi-purpose room this year, with construction tentatively scheduled for 2014.
Other projects called for in Measure Q, including artificial turf on campus football fields, will be considered in years to come.
‘A decent deal’
Before the NHUHSD board held its regular monthly meeting Dec. 11 and approved the new spending, it held a special two-hour study session on bonds. This was sparked by the recent controversy over school districts throughout the state paying high interest rates for bonds.
At the heart of the controversy are Capital Appreciation Bonds, which allow districts to delay making payments for years, but have high interest rates.
Of the $8 million in bonds obtained by the NHUHSD, $195,000 were in the form of CABs. The interest payments alone on those CABs will come to nearly $1.8 million. That means the district is paying $1,975,000 for less than $200,000. That’s 10.1 times more than the amount acquired for school repairs.
This sounds bad, but school officials and bond advisor Greg Isom were quick to point out that the CABs need to be taken in context. They are part of an overall bond financing package of $8 million. When that entire package is paid off in 2036, the district will have paid a total of $17.4 million, a ratio of 2:1. “This is considered a good debt ratio,” Isom said.
Isom told the trustees that had the bond package not included the CABs, then the interest rates on the more conventional bonds used would have been slightly higher to make up the difference, and perhaps would have resulted in higher cost overall.
“It’s unfair that you guys got lumped into the controversy,” Isom told the trustees.
Humboldt County Treasurer/Tax Collector John Bartholomew was in attendance at the study session, and agreed that the bond financing was done appropriately.
“I don’t know if you could have gotten a better deal.” Bartholomew said. “This is a decent deal, even by today’s standards.”
NHUHSD District Trustee Dan Johnson quizzed Superintendent Kenny Richards about the bond, noting that Richards was retiring at the end of the week. Johnson said that the bond program was part of Richards legacy, and asked the outgoing superintendent if he was “completely comfortable” with the bond financing.
“I am,” Richards declared.
“There was a reason we passed the bonds. Our schools were falling apart,” Richards said.
Referring to the state-wide controversy, Johnson asked Richards “When all this press came out your butt didn’t pucker?”
Richards said no, adding “I feel good about it.”
Isom noted that bond rates have fallen over the last year and a half, so the rates the district will get on the new bonds should be even lower than on the previous bonds. The actual interest won’t be known until the deal is made in January. Isom said the new package won’t contain any CABs.