No high-stepping marching band or cheering crowd of onlookers celebrated the event, but it would not be an exaggeration to call the Tuesday, October 14 joint meeting of the Moore County Board of Education and Moore County Commissioners “historic.”
It was little more than a decade ago that the two boards found themselves in a funding dispute so acrimonious that the school board sued the commissioners. It has taken many years for that chill to thaw.
What brought the two boards together on October 14 was the need to build and expand school facilities — to relieve overcrowding in high schools and elementary schools, to replace aging buildings, and to develop a new magnet high school that would offer students job training or a head start on their college career.
The standard playbook for building new schools has the school board developing a master facilities plan encompassing ten years and $50 $75, or $100 million in projects; voters approving the sale of school bonds; and commissioners figuring out how to pay back the principal and interest on all that borrowed money.
“We had always just pretty much been told that a bond was our only option,” school board member Laura Lang said during the joint meeting. “No one had ever said that we can borrow cheaper than we can do a bond . . . . Nobody had ever said that before.”
Interest buys nothing but time
Another option is just what the commissioners have in mind. Because, as Commissioner Randy Saunders explained, in the current interest rate environment, the county can borrow short-term money from banks at a far better interest rate than can be obtained by selling bonds with a twenty or thirty year maturity on the public market.
Moore County voters approved the sale of more than $60 million in bonds for Moore County Schools [MCS] and Sandhills Community College in 2007. Saunders explained that the county stills owes about $50 million of that total — and will have to come up with another $17 million in interest before that debt is repaid. Moreover, those bonds can’t be paid off early in order to save some of that interest.
“Interest doesn’t buy you anything but time,” Commissioner Nick Picerno explained. “That’s it. It doesn’t buy a seat, it doesn’t buy a pencil, it doesn’t get you anything but time.”
The school board’s list of projects is expected to cost $110 million. Saunders said the County’s financial advisors had projected the interest cost on the sale of $100 million in bonds at current market rates.
“The interest on that would build your three elementary schools,” Saunders told school board members. Each new elementary school is expected to cost $15.6 million.
By contrast, the county’s financial advisors report that the interest rates currently offered by banks would allow the County to borrow $60 million and pay only $2 million in interest.
“We are probably going to have to borrow something somewhere,” Saunders said. “But if we do short term borrowing, and the county prospers, and we continue to find ways to cut costs . . . then we could pay that debt off.”
Pick two and start building
Saunders explained that the Commissioners have accumulated a bit more than $20 million in a capital account, recognizing the up-coming need for school construction. That is roughly the price tag for the first two projects on the school board’s ten item facilities to-do list: adding capacity for an additional 400 students at Pinecrest High School and another 260 students at Union Pines High School.
Even if the schools started those projects today, Saunders explained, the bills will not all come due at once, giving the county time to accumulate more surplus in its capital accounts — or, if necessary, to arrange for short-term borrowing.
“We need flexibility in managing our debt,” Saunders said. “We are in a positive cash flow position, we are in a great financial situation to borrow money — short term, long term, or not at all.”
Saunders said what the commissioners need to know is whether the Pinecrest and Union Pines projects are indeed the school board’s number one and two projects, as well as the cash needs and timing for those projects.
“And we’ll worry about projects three, four, and five in twelve to eighteen months,” he said.
“If we prioritize it right, and do it right, then the money won’t all be going into interest,” Picerno said. “It will going into building the facilities that we need.”
Mindful of upcoming elections that will replace at least one member of the school board and two on the board of commissioners, chair Kathy Farren said the school board will consider in December whether the Pinecrest and Union Pines expansions are in fact their top priorities, relaying that to the commissioners for possible action in January.
Both Picerno and Saunders stressed the need for continued communication between the boards, so that county officials have a continual read on the school board’s projected need for construction funding.
Those two commissioners have held planning meetings in recent weeks with school board members Bruce Cunningham and Ben Cameron, along with the top managers of both organizations. Saunders said he hoped those meetings would continue as the plan for new and expanded school facilities moves forward.