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Debt concerns could delay, alter projects

Posted on May 7, 2009May 7, 2009 by Staff

By Kirk Ross and Susan Dickson
Staff Writers

Shifting budget numbers at the state and local level could result in a delay in construction of a new elementary school in the Northside neighborhood.

After the latest round of financing, Orange County is close to its self-imposed debt ceiling that keeps debt service at or below 15 percent of the annual budget. County officials have said that might lead to a delay in financing for the new school, which is expected to cost roughly $34 million.

The state budget also plays into the debt-service discussion because a key proposal to save money this year by increasing class sizes would change the capacity numbers used to determine when a new school would be needed.

According to Chapel Hill-Carrboro Board of Education Chair Lisa Stuckey, the district’s current projections indicate that elementary school capacity will be exceeded in 2010. District officials had planned to open Chapel Hill-Carrboro’s 11th elementary school in the fall of 2011.

However, the Legislature is considering changing the funding the state provides for teachers to increase class sizes from 18 to 24 students in kindergarten through third grade, 22 to 29 in grades four through nine and 26 to 32 in 10th through 12th grade.

The change in class size would increase school capacity, which would alter the projections for when district elementary schools would be considered high enough over capacity to require a new school.

Stuckey said it’s unclear when district officials will know whether plans for the elementary school will ultimately be delayed.

County Commissioner Mike Nelson said that while he’s concerned about the delay of the school, “The reality is what it is and we have to deal with it.”

Nelson said commissioners want to hear from the school board on what their priorities are regarding capital improvement projects. At a recent budget work session, Carrboro-Chapel Hill school leaders said the new elementary school, the arts wing for Carrboro High School and a new phone system are among the items at the top of the list of capital needs.

“I’d like to know if they want to push ahead with the elementary school or fund other items on the list,” he said, adding that commissioners have been receiving a number of comments from parents of students at Carrboro High who want to see the arts wing built.

Gary Humphreys, the county’s finance director, said that the 15 percent policy is in place to make sure the county maintains a solid rating on its bonds, which helps keep the interest rates on debt reasonable.

Humpheys said the county currently has an AAA rating with Fitch and AA+ with Moody’s and Standard & Poor’s.

He said that paid off last month when the county took on $25 million in debt for the Gateway building, new county offices and a new library in Hillsborough. The county also closed deals last month for the remainder of bonds approved in county referendums, including $5.5 million in parks bonds and $1.4 million in affordable-housing bonds.

County budget director Donna Coffey said the current year debt service is at 14 percent of the annual budget. Given the new financing and that the budget will drop in the next fiscal year, which starts on July 1, that percentage will rise to between 14.5 and 14.8 percent.

“If that trend continues into the following year, we’ll be skirting along close to the limit,” she said.

Coffey said the exact numbers are still an unknown. County Manager Laura Blackmon is scheduled to announce a proposed budget next Tuesday. Even then, the final numbers from the General Assembly may not be decided until well into the next fiscal year.

“There are a lot of unknowns at this point,” she said. “The crystal ball is still cloudy.”

1 thought on “Debt concerns could delay, alter projects”

  1. Elliot Baron says:
    May 10, 2009 at 9:23 am

    No wonder we can’t afford to keep building schools to keep up with new residential growth… the construction costs KEEP GOING UP!

    Rashkis cost $13 million. Morris Grove cost $25 million. The new Northside school is budgeted for $35 million.

    That works out to about $60,000 for each student, just to provide desk space. The cost of providing a K-12 education costs another $120,000.

    How long can we afford to keep growing like this? I guess we just found out the answer. We have exceeded our sustainability.

    Look forward to higher taxes, overcrowded schools and lower per student education expenditures. What a bleak forecast.

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