Wake County commissioners want to avoid bond referendum for school construction

Wake commissioners may forgo a bond referendum to fund school construction this year because they fear it would jeopardize a countywide transit plan, which they hope to partially fund with a half-cent sales tax referendum.

The Wake County Board of Commissioners is scheduled to meet Wednesday with the Wake Board of Education to talk about the school district’s construction and renovation needs in the coming years.

Wake commissioners are responsible for funding facility construction for the county school system, and for years they’ve done it by asking Wake voters to approve a bond referendum, giving commissioners permission to borrow money or raise taxes for the effort. Bond referendums typically allow governments to borrow more and at better rates than they would through other means of financing.

But this time, commissioners are looking for ways to fund school construction without putting a referendum on November’s ballot. The reason: They’re hoping voters will approve a half-cent sales tax increase to help fund the transit plan, and they don’t want to confuse or overburden constituents.

“What we’re gonna try to do, because of the transit referendum and not putting so much of a burden on our taxpayers, is find bridge funding like limited-obligation bonds,” commissioners’ Chairman James West said.

Limited-obligation bonds typically draw higher interest rates than general-obligation bonds because, unlike general-obligation bonds, they don’t require commissioners to raise taxes to repay the debt or secure borrowing approval from voters.

“In concept, what we’re trying to do is avoid any sort of tax increase or bond referendum for this coming fiscal year,” West said.

The Wake Transit Plan, which costs an estimated $2.3 billion, would add trains and buses in a way that could quadruple transit ridership in Wake County by 2027. The transit plan is top priority for commissioners, who are all Democrats, because they’ve sought it for years but were stymied by Republican commissioners who controlled the board until 2014.

If they withhold a school referendum this year, commissioners would have to come up with other means for construction funding next year, too. Under a state law approved in 2014, counties can hold special elections – such as a referendum on a bond issue or tax increase – only in even-numbered years or during regular countywide elections.

As a result, commissioners want to establish a more stable and predictable way for funding school construction, Commissioner Caroline Sullivan said.

“Looking at debt this way depoliticizes these bonds,” Sullivan said. “We need to start looking at it more as a building program than a bond program.”

Their idea of bypassing voters is already drawing criticism. The Wake County Taxpayers Association, which opposes the transit plan, also opposes any borrowing that’s not approved by voters, said Ed Jones, chairman of the group’s board of directors.

“Elected officials seem to have no sense of reality when it comes to spending other people’s money,” Jones said.

Wake County has bypassed voters in the past to borrow money for some big-ticket construction projects. But this could be the first time that commissioners have gone that route for school projects.

In 2009, commissioners authorized selling $320 million in limited-obligation bonds, $160 million each to pay for the Wake County Justice Center and the expansion of the Hammond Road Detention Center. Commissioners said at the time that interest rates were too low not to go ahead with selling the bonds to finance the projects. Critics charged that Wake could have gotten even lower interest rates if they had sought voter approval to issue the bonds.

Leaks, roaches and lack of heat

To start the first projects in the next building program, the district would need to get a new round of money from the county by fall 2017, according to Joe Desormeaux, the district’s assistant superintendent for facilities.

Desormeaux said the list of new schools and renovations for the new program won’t be finalized for a few months. But some projects are more time-sensitive than others.

The district would need to know by fall 2017 that it has $90 million to start the renovations of Vandora Springs Elementary School in Garner and Apex High School, according to Desormeaux. The school system plans to temporarily relocate students and staff starting in August 2017 while both campuses are rebuilt.

The money to demolish and rebuild Apex High from scratch would be welcomed by the students and staff at the 41-year-old school.

Opened in 1975, Apex High is showing its age, as the school staff deals with leaks, foundation settling, rooms that don’t heat or cool well and roach infestation. Maintaining electricity in power-hungry areas such as the culinary program kitchen can tax the power system.

“It never fails that when we turn on the stoves or the KitchenAids (mixers), you hear the big popping sound of the circuit breakers tripping,” said Erica Hoskins, a culinary teacher at Apex High.

What’s available

Wake doesn’t know exactly how much it could borrow and pay back using only money from its regular cash flow, said Johnna Rogers, a deputy county manager. But she estimates the county could borrow about $450 million over the next two years.

School board member Jim Martin said the district needs about $300 million a year to keep up with construction needs, so $400 million over two years is on the “lean side.”

Martin, a member of the board’s facilities committee, pointed to how the school system had scaled its needs for the 2013 bond referendum by more than half.

“Four hundred million over two years is backing off by a third what we’re doing in the current bond program,” Martin said. “Our current bond program isn’t meeting needs.”

The school district’s current $994 million construction program – funded by a 2013 bond referendum – includes 15 new schools, five major renovation projects and a number of smaller projects around the district. The last round of major projects would be completed by the 2018-19 school year.

The school district is projected to add nearly 13,000 more students by 2020, reaching an enrollment of 170,000.

“Although growth has slowed down, it’s still there,” said school board Chairman Tom Benton. “It’s still heavy growth, not even counting the number of schools needing major renovations.”

This story was originally published January 31, 2016 at 4:40 PM with the headline "Wake County commissioners want to avoid bond referendum for school construction."