AES project inches forward
WINTON – The Hertford County Board of Commissioners have approved an agreement with Davenport & Company who will guide and advise the county on financial matters regarding the construction of a new Ahoskie Elementary School.
The board, after hearing a presentation from Ted Cole, President of Davenport & Company, approved the measure without objection at their regularly scheduled meeting on Aug. 20. Cole’s company has a past history with the county, providing financial advice and guidance during the building of the new Hertford County Courthouse and Government Center in 2013.
Cole informed the board there are two ways to finance the proposed $13.88 million school project – through the sale of limited obligation bonds or by way of a bank loan. He presented board members with a 55-page booklet that detailed items such as the county’s bond/credit rating, general fund operations and fund balance, existing county debt that’s supported by property tax revenue, existing water and sewer debt, and the county’s debt capacity.
“You are in pretty good shape with your fund balance and your bond/credit rating is good,” Cole noted.
“Today, you have about $12 million in general fund debt on the books which is tax supported,” he added. “We feel you have the debt capacity and the debt affordability to take on a project of this size, and that’s what lenders want to see, want to be comfortable with. You have the resources to repay this debt.”
The booklet detailed bond/loan paybacks over a 15 to 20-year period.
“Twenty years is typically the max (payback period); plus the LGC (Local Government Commission, a state entity that must approve the project and the debt) will closely study whatever route you choose to take,” Cole remarked.
“We want to keep all the funding options open,” Cole said, adding the county used the limited obligation bonds method in 2013 to obtain funding for the new courthouse/government center project.
“The bank (loan) market evolves over time; it wasn’t a very good option back in 2013, but things have evolved since that time and we believe there’s a good opportunity that you might get bank financing in place for this project in a way that’s a little more efficient and less time consuming than the bond route. The real question there is what are the interest rates,” Cole said. “We want to take the best choice that is right for your budget.”
Currently, Cole said a bank loan at 20 years is at a 4 percent fixed rate. The bond market, he said, is closer to a 3.5 percent interest rate. At 15 years, the bank loan comes with an approximate 3.5 percent interest rate while a bond is at roughly 3 percent.
“The bond market today is more favorable with its interest rate, but there are a few more moving parts, some additional costs, to that type of financing,” he noted. “Whichever financing method you choose, what you want to see on the bottom line is which one gives you the best value in the terms of annual payments on the loan.”
Cole cautioned the board that they did not have to immediately choose which financing route they needed to take.
“We’re not talking about borrowing any money until 2019; it’s premature at this point to choose one way or the other,” he stressed. “There’s time to further access that as things get closer to the date when you have a (construction) bid.”
He said the LGC likes to see “bids in hand” before giving their blessings on any project.
“They want to make sure that the money you are borrowing is adequate, but not excessive for your project,” Cole observed. “That’s the work we will be doing with your staff over the course of the next few months as this project progresses. We will come back to this board periodically to give updates as the project develops.”
Hertford County Manager Loria Williams said at this stage of the process, all the county has is an estimate of the proposed project ($13.88 million).
“Let’s hope that cost estimate is good and as accurate as it can be,” Williams said. “We won’t know the actual cost until we put out and receive the construction bids.”
The Hertford County Board of Education has updated a timeline for the project. That calls for schematic design and design development between now and Nov. 26; construction documents phase completed by Feb. 25, 2019; receive all necessary permits by March 25, 2019; issue documents for bids by March 28, 2019; award the construction bid by April 25, 2019; receive LGC approval by June 4, 2019; choose the financing method by June 28, 2019; begin construction (an estimated 14-month process) in July of 2019; and open the new school to students/staff in January 2021.
On Monday, the commissioners approved the financial advisory agreement with Davenport & Company at a cost not to exceed $85,000 plus any customary out-of-pocket expenses such as mileage, meals and lodging.
At a meeting in late June, the commissioners approved one of the three options for the new school – a 57,150 square-foot facility across the street from the current Ahoskie Elementary School. The latter has served students since 1959 and has been a topic of serious discussion since 2011 to replace the aging facility.
The chosen option has room for 400 students (600 core) with 14 classrooms, media center, cafeteria/kitchen, a gym (with a platform stage / no bleachers) and no auditorium. Space will be left vacant to possibly add four classrooms.
The new school’s main entrance will be on First Street (NC 561), adjacent to the Town of Ahoskie Cemetery. Faculty/staff and bus entrances to the school will be off Ruth Avenue.
To help offset the cost, the commissioners and members of the county’s board of education have stated their intent to apply for a Needs-Based Public School Capital Fund from the state.