Recently, I have had the opportunity to take on a more active role with our board as acting superintendent. Not only have I had the opportunity to work with our great administration and staff in developing plans to bring our students back to some school normalcy, I have been working with our board members in moving the Tallassee High School main building project forward. It has taken some time to get all the moving parts in alignment; however, it has been accomplished.
The genesis of the funding for this project came from our mayor, John Hammock, and the current city council appropriating new funding. They had the foresight and political will to propose a new tax. The council then passed a resolution directing a portion of the extra revenue to the board of education for improving schools in the system.
That being said, our school board members, along with the superintendent, have a fiduciary responsibility to our community and tax payers that we all take very seriously.
I would like to share a few numbers with the community relative to savings that were realized in future debt service related to this project by not acting with haste. Last December (2019) our board asked our bond banker to run a debt service amortization schedule for the needed 16.5 million dollars to complete the high school project. The rate quoted was 3.23% TIC (True Interest Cost) for a 30-year fixed rate. Last week, the same lender ran a similar schedule for 16.5 million dollars and the rate is now 2.88% TIC. The savings realized equated to $1,660,800 over the life of the loan.
Tallassee City Schools makes great efforts to do business locally and return tax payer dollars back to the community. Over the last two years, I, as the board representative, have met with several local banks in the lens of shopping locally. The meetings resulted in some very attractive rates; however, the local banks could not take on this size loan with the terms needed (fixed rate for 30 years). Several were willing to lend the money, in a construction style loan, that would require the board to seek permanent loan financing at the end of the build. Others offered a product with an attractive fixed rate for only 10 years. After 10 years the rate would go variable. There are major risks in both of those scenarios that the board should not take with tax payer funds. Low, fixed rates are in the best interest of the school system. The Alabama State Department of Education reviews and approves or declines all capitol building projects by local school boards. They at best frown upon variable rates and at worst reject such loan terms for school boards to enter into, according to the board’s financial advisor.
Again, the board and the superintendent have a responsibility to shop for the lowest borrowing cost, lowest interest rate, and the safest terms for the school system. We’ve watched sales tax collections in Tallassee for the last several months and have actually seen an increase. The sitting board has done an excellent job managing the funds we have in reserve. The state requires that a local board maintain one month of operating balance. Tallassee City Schools has approximately a 5-month operating balance. Many systems in Alabama would relish such a savings account.
As noted above, the board works with a financial advisor to ensure its interests and the tax payers’ dollars are protected as building decisions are made. I’m looking forward to working with our board and bringing a project to our community that all can be proud of.