Approved – School system to borrow $18 million

Posted by Dan Whisenhunt April 2, 2014
The City Schools of Decatur Board of Education discusses an agenda item during the April 1, 2014 board meeting. Photo by: Dan Whisenhunt

The City Schools of Decatur Board of Education discusses an agenda item during the April 1, 2014 board meeting. Photo by: Dan Whisenhunt

During its regular meeting on April 1, the City Schools of Decatur Board of Education voted to borrow $18 million for school construction projects.

The borrowing is in the form of certificates of participation, or COPS financing. COPS works as a lease-purchase agreement, allowing the school system to use its assets as collateral. Under the proposed financing agreement, City Schools of Decatur would transfer title for Clairemont, Glennwood and Oakhurst Elementary Schools to the Georgia Municipal Association. GMA would then sign a lease with the city school system. This lease agreement will be the basis for borrowing $18 million.

The school board voted unanimously to authorize issuing certificates of participation.

CSD will take that money and use it to add classrooms and a cafeteria at Decatur High. Part of the money will also be used to design expansions at Renfroe Middle. The term of the loan will be for 30 years, at an interest rate of 4.19 percent, CSD financial advisor Dianne McNabb told school board members. At the end of that 30 years, the school system will have paid $33 million, including paying back the $18 million that will be used to pay for the expansion.

McNabb said the system would’ve likely received a better interest rate through a general obligation bond. City Commissioners in August voted unanimously to postpone putting a bond referendum on the ballot until November 2014.

McNabb said the reason for the higher interest rate is COPS financing is considered a higher risk.

“Technically, you could choose to terminate the lease at the end of any year and walk away from it, and you would not be in default,” McNabb said. “Your name would be Mud in the market place, but that additional risk does result in the slightly higher interest rate.”

McNabb said waiting on borrowing the money could cost the system more, too.

“Where we think interest rates are going is up, not down,” she said.

It’s the same direction as CSD’s enrollment. Figures released in advance of the April 1 meeting show that the system is already at 93 percent of its projected enrollment for the 2014-2015 school year. Grades 10-12 have 23 more students than the projected enrollment for next year.

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  • Guest

    Is it correct that the city gets the title back at the end of the term? And, is it correct that the interest rate (4.19%) is fixed?

    • I know the city gets the title back. Don’t know that the interest rate is fixed. I can check.

    • Yes, it is a fixed rate.

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