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Hoover school board considers borrowing $12 million for capital projects

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The Hoover school board is trying to decide whether to borrow $12 million to pay for additions at two schools as part of a debt restructuring, or simply use money already in the bank.

The board spent about 30 minutes discussing the matter at their school board meeting tonight before deciding to meet again at 7:30 a.m. Thursday for further discussion and possible action.

Matt Adams, a financial consultant with Raymond James & Associates, spelled out options for the board.

The primary task is to take advantage of lower interest rates to refinance almost $109 million of debt the school board issued in 2010. If the school board were to take that action alone, it would save almost $7.9 million, Adams said.

But Adams gave the board another option that involved borrowing $12 million for capital projects and leveling out debt payments over time by restructuring two other bond issues from 2012 and 2017 totaling about $21 million.

The board would save $1.6 million with the second option but also would pay about $5 million more in extra interest to borrow the $12 million, Adams said. The net result would be an additional cost of roughly $3.4 million, and debt payments would be stretched out two additional years to 2042, Adams said.

The benefit would be that debt payments would stay around $12 million per year instead of rising from $11.8 million this year to $13.3 million in 2020 and staying above $13 million until 2026, Adams said.

School board President Craig Kelley has said at least twice that he is uncomfortable borrowing another $12 million. The school district had about $116 million in its overall fund balance at the end of November, records show.

Adams said the school board needs to take some action soon because the bank that presented the best bid for the school district’s business — Capital One Public Funding — is holding the interest rates for the system.

The proposed interest rate to refinance the $109 million 2010 bond issue is 3.8 percent, while the interest rates to refinance the 2012 and 2017 bond issues are 3.95 percent and 4.9 percent, attorney Heyward Hosch told the board. The board would have to wait at least 10 years before it could refinance any of the debt again, Hosch said.

The capital projects the board plans to undertake include an 18-classroom addition at Berry Middle School, an eight-classroom addition at Bluff Park Elementary School, demolition of some portions of the old Bluff Park Elementary School and renovation of other parts of the old Bluff Park building.

In other business tonight, the school board heard from Terry Lamar, the school district’s director of equity and educational initiatives, who said Hoover City Schools received an A on its state report card this year. The Hoover district was one of only 15 school districts in the state (out of 137 school districts) to receive an A this year, and Hoover was the largest system to do so, Lamar said.

The school board also:

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