Borrowing funds to build schools

Wednesday, Sept. 8, 1999 | 10:48 a.m.

Southern Nevada could get nine more new schools years ahead of schedule if the School Board approves a plan by its staff to borrow future income from a $3.5 billion school bond that was approved by voters last year.

The plan will be presented to the School Board as early as this month to generate $675 million to finance the construction of more badly needed elementary and middle schools by 2003.

Clark County School District officials say they came up with the plan because the property taxes that provide 71 percent of school construction money are tied up through 2002 to pay off the 1994 and 1996 school bond debts. The district won't be able to tap into the 1998 bond money until those debts are paid.

Officials in the Facilities and Transportation Services Division have come up with a plan that calls for the district to borrow from hotel room tax revenue, which provides 19 percent of school construction funding, and real estate transfer tax money, which provides 10 percent of school building money.

School officials plan to repay the loan over 20 years, figuring in a projected 3 percent increase over what they previously thought they would receive in property tax income after 2002.

Some would say the plan sounds like robbing Peter's college fund to pay for Paul's private prep school tuition.

"It's more like getting a loan now to buy a car knowing you have a return check coming from the Internal Revenue Service to pay off the loan," said Walt Rulffes, assistant superintendent of business and financial services for the school district.

"We are accelerating it (the bond money) because a critical need exists now to build schools. I think this plan is at the vanguard of financing for new schools. It is cleverly crafted and safe. It is one of the best plans I've seen in my 28 years in finance."

District officials say the plan is a good gamble because the valley's continued growth will boost property tax income even higher than what has been projected. But that also means more children will be moving into the area than previously thought, creating an even more urgent need to build schools now.

If school officials are wrong and the tremendous growth suddenly stops, fewer children will move into the district and fewer schools will need to be built, giving school officials a chance to catch up with the current demand.

"We have to try to meet the projected seating deficit, and if we don't look for ways now we'll be seeing problems big time later," said Pat Herron, assistant superintendent for the Facilities and Transportation Services Division.

This year about 216,000 children are enrolled in Clark County schools. Nine years ago, that number was about 122,000. Nine years from now, school officials project, that number will exceed 347,000.

Currently, plans are to add six schools next year, eight schools in 2001, 11 schools in 2002 and 14 in 2003. That will give the county 20 elementary schools, 11 middle schools and eight high schools in the next four years.

The new borrowing plan if it's approved would add nine to that count, with some of those schools possibly opening in midyear, Herron said.

The district already has approved $100 million to provide funds for land acquisitions based on the facility department's borrowing plan.

"People have a misconception when they hear the bond money is coming in at an accelerated rate," Rulffes said. "We are accelerating it by borrowing it. This is not extra money or found money that can go elsewhere. It is money that is designed to be used specifically for building and maintaining schools."

Clark County voters in 1998 approved Question 2 to build 88 schools through 2008 and to place a rate freeze on property taxes.

Unlike previous school bonds where voters approved predetermined bond sizes -- $605 million in 1994 and $643 million in 1996, for example -- the more recent measure authorizes the issuance of bonds through June 30, 2008, as long as the payment of those bonds does not result in an increase in the existing property tax rate.

As a result, the district expects to be able to tap about $2.5 billion in future property taxes and another $1 billion in future real estate transfer and room taxes in the next 10 years to build and renovate schools.

They just want to get a good portion of it a little sooner to start the process.