Board approves $10M construction plan

The Terrebonne Parish School Board unanimously approved a final plan to borrow and repay $10 million for school construction projects at last Tuesday’s meeting.

The money – Qualified School Construction Bonds – is authorized through the American Recovery and Reinvestment Act of 2009 and awarded through the state. The interest-free bonds provide federal tax credits in lieu of interest to reduce an issuer’s cost of borrowing for public school construction projects.

Superintendent Philip Martin said the school system had until Nov. 3 to enter into a bond contract or the state would have withdrawn the bonds.

There are several restrictions and conditions on how the funds can be used, said bond attorney Jerry Osbourne.

The board has six months from the date the bonds are issued to enter a contract to spend 10 percent of the borrowed money, he said.

Any projects the school system starts must be completed within three years.

“I’m not a brave man, so I would probably pick projects that can be done in two years,” Osbourne said.

Regions Bank is buying the bonds and, in turn, loaning the school system the $10 million.

Regions’ interest on the loan is 6.9 percent – 5.86 percent of which will be paid in the form of tax credits directly from the federal government. The school district must pay the remaining 1.04 percent.

Osbourne said the loan will be repaid in 15 years by depositing $666,666 annually into a sinking fund – a pool of money set aside to help repay a bond issue. Incurred interest will be paid annually; the final year, the district will pay the principal amount borrowed.

The school board can keep the interest earned on the money in the sinking fund.

Osbourne said interest rates on government bonds are the lowest they’ve been since the 1960s. However, he noted, if interest rates rise over 2.1 percent over the life of the bond, the board will pay back less money than it borrowed.

“A few years from now, interest rates are not going to be this low,” Osbourne insisted. “You’re going to make a lot more interest, so you will pay less than you borrowed.”

“I think we would be negligent in our duties if we did not take advantage of this opportunity.” Martin said. “They’re giving money to the school system.”

To pay back the bonds, the board is asking voters to pass a ballot initiative on Saturday to rededicate a portion of the 1-cent sales tax.

Currently, 83 percent of the tax goes toward teacher salaries and benefits. Seventeen percent is evenly split between technology upgrades and school maintenance – all or a portion of which the district intends to use to repay the bonds.

It the measure is not passed, Martin said the school board would pay off the bonds through its property tax.

In other news, the school board voted 7-2 to pay an additional $173,426.07 in cost overruns on installing modular buildings at Caldwell Middle School, Broadmoor, Lisa Park and Oakshire elementary schools.

Voting in favor were board members Roosevelt Thomas, Greg Harding, Richard Jackson, L.P. Bordelon, Roger Dale DeHart, Donald Duplantis and Hayes Badeaux. Opposed were Rickie Pitre and Clark Bonvillain

The board normally approves budget adjustments before the work is completed, but that did not happen in this case.

Pitre and Bonvillain objected because school administrators had already paid the vendors before the school board approved the money.

Pitre argued the projects’ architects, engineers and contractors should have to absorb cost overruns and that some of the expenditures were grossly overpriced.

“I’ve had enough with the after-the-fact adjustments coming in and (the administration) saying we’ve got to pay the bill,” he said. “Some of those vendors were paid eight, nine months ago and they’re just now coming to us with this.”

“We don’t want to be seen as a school system that doesn’t pay its bills,” DeHart countered.

Martin said the school system has implemented stopgap measures since July 1 to ensure that the board approves all budget increases.

“When anything approaches the cumulative total of the budget, everything stops,” he said. “We’re going to regroup and scrutinize any extra work to make sure we stay within what we think it’s going to cost.”