Decatur begins process of borrowing $75 million for schools
Voters provided validation for the City Schools of Decatur on Nov. 3 when they overwhelmingly approved a plan to borrow $75 million for school construction.
Now the bond proposal awaits a validation of a different kind as city and school officials make arrangements to sell bonds. School and city officials are also deciding whether they want to borrow all of the $75 million at once or borrow some of it now and more later as needed.
Currently the school system has about 4,300 students, but will have over 6,000 by 2020. The $75 million to-do list for CSD includes $15 million for a new elementary school. The school board has about six acres along Talley Street under contract.
According to City Manager Peggy Merriss and City Schools of Decatur Finance Director Susan Hurst, the city will file a petition in Superior Court in order to invite anyone who might file a legal challenge against the bond to object. Once that process is through and it’s validated by a judge, it will in theory help Decatur secure a lower interest rate on the bond debt.
“Basically the validation is like suing ourselves,” Hurst said.
Merriss said the validation hearing could occur in December.
“Anyone who wants to question the validity of the bond or file a complaint about the process, they get a chance to have that hearing,” Merriss said. “Then they’d hear the arguments from the issuer, and make a decision. Normally it’s a pretty straightforward process. I’ve never had anybody show up.”
The city will likely sell the bonds early next year, Merriss said, as the markets are not as favorable in November and December.
“We have to issue a preliminary offering of sale,” Merriss said. “We have to have bond rating calls with the rating agencies … Once the bonds are issued, normally closing takes a week to 10 days or so.”
City and school officials haven’t decided whether to borrow the money in stages or to borrow the entire $75 million.
“We’re leaning toward doing it as a single issuance,” Merriss said. “The money will be placed in a construction account and drawn upon as the school system projects take place.”
It has been suggested at board meetings that if CSD doesn’t need all the money, it could be returned. Merriss said there would be a provision that would allow for CSD to do that if enrollment doesn’t meet projections and the school system doesn’t need as much space.
“You would hold it in escrow to return to the bond holders. (That’s) one of the things the school system will need to decide in this process,” Merriss said. “They should have a pretty strong feeling for the amount of money they want when we go to the market.”
Paying off bond debt is expected to raise property taxes in Decatur by 8 percent. Merriss said the tax increase will likely be incremental and will be determined by the payment schedule for the debt.
“The millage rate won’t go up all at once,” Merriss said. “It will go up over a period of two years.”