Southern Fulton To Proceed With Feasibility Study
After hearing input from their financial consultant on interest rates and construction costs, members of the Southern Fulton School Board launched into a prolonged discussion last week on the proper time to take on a construction project to alleviate space constraints given the current state of the economy.
Last Tuesday, February 16, at the request of the administration and board, Gordon Walker presented the group with a set of numbers pertaining to several different-sized building projects for 2011 as well as current debtservice figures.
Current debt service is recorded at an estimated $5 million, but the debt is short term, Walker shared. He further related that borrowing $1 million for a new project would include a “local net effort” of nearly $30,000 through the year 2019. A $2 million scenario would have a local net effort of $60,000 and pay off in 2020, while a $3 million project would accordingly pay off in 2021.
Walker stated starting in 2011 the district would still be out of debt within a 10-year period, which “paints a good picture” as some districts remain in debt for 20, 25 or 30 years.
He added there would be nothing wrong with the district utilizing $500,000 of its own funding for each year of a four-year time frame. He also proposed the option of using district money in conjunction with assuming debt.
Under questioning by board President Kenny Wuertenberg, the board learned from Walker that from a legal standpoint it is a good time for the district to borrow. However, in order to initiate the borrowing process, the district must first have the initial step of the construction, known as Plan Con A, completed.
Even in instances where a construction project is not reimbursable by the state, approval must be first given by the Pennsylvania Department of Education (PDE). In addition, the services of an architect should also be obtained to not only oversee the design of the project but also attend meetings and take care of necessary forms and paperwork, according to Walker.
“PDE will want to know who will be marshaling this project,” said the financial consultant, who noted he did not know how the district would be able to proceed without the services of an architect even if the project were as minimal as $500,000.
Walker indicated if he were a member of the Southern Fulton School Board, he would first look into paying off the 2003 bond series and use up or deplete excess cash on hand before proceeding with borrowing for the next project.
Walker also made reference to contractors being “hungry” at this time, to which board member Allen Morton responded “people paying the bill are hungry too.”
Walker was instructed by the board to rerun the numbers when looking at paying off half and all of the 2003 bond series.
Following Walker’s presentation, the board turned its attention to the topic of architect interviews and selecting one of the interested firms to prepare a feasibility study to help determine what building option would best suit its needs or if construction is even necessary at this time.
Morton reminded the group the district is still $5 million in debt. “I know we need more room, but the economy is suffering. It’s impossible to do a building project without raising taxes. I think we should keep investigating this for the next three to four years until times are better,” said Morton.
Fellow board member Donald Whiteside contended the board should move ahead with the project due to low interest rates and good prices on construction and related materials. Whiteside added by agreeing to have a feasibility study prepared, it does not commit the district to build but merely to learn about possible expansion scenarios.
Following up on Morton’s comments, Patrick Bard said he hated to have debt burden of that magnitude without knowing what the future will hold. Bard made note of the high unemployment rate in county and the uncertainty of what will happen in upcoming years.
“I would rather focus our efforts on paying off current debt,” he said.
“Let’s look at five to seven years from now. The economy will likely pick up as will the housing industry. Fulton County is a lovely place to live,” countered Whiteside. “ ... We’re going to have to have something done to our facilities ....” We need to look down the road, not just at today.”
Superintendent Ralph Scott said the district does not have ample room to accommodate the addition of another special education teacher. A modular building would have to be purchased costing the equivalent of a year of debt service, he said.
“My big fear is that we spend a lot of money, and we reduce services to the people,” Morton chimed in.
Scot went on to say that the district’s space issues are not based on enrollment, which is “pretty stable,” but on curriculum needs. As an example, advanced placement and additional special education classes cannot be offered to the student body without sufficient space.
“You can kick this can down the road, but the road is going to end sometime,” said the superintendent. “ ... If there is a best time, it’s now because of interest and construction rates ... . There is potential for severe ramifications if nothing is done.”
“A feasibility study is planning, and planning is prudent,” said new board member Mark Mosemann.
On a motion by Whiteside and Timothy Hull, the board agreed on a 6-3 roll-call vote to interview architects and based on those findings have one of the firms complete a feasibility study. Board members Morton, Danny Crouse and Timothy Mellott voted against having a study completed.
A feasibility study ranges in price from $3,500 to $35,000, and the district currently has $25,000 set aside in the budget for the study. The cost of the study would be waived by the architect in the event the district moves forward with construction. Economic costs contained in the feasibility study must be recalculated if the district does not move forward with construction within one year of the study’s completion.