001Even though it's just a work session, we still have to call it to order. So, everybody good to go? Yep. >> All right. I'll call this meeting to order. Patrick. >> So, uh wanted to get the board together and the team and I wanted to ask Scott to come up and even though I this has already been done. This is a kind of a repeat, but we're getting closer and based on the timeline of when we have to do things for the Day Spring Elementary to fund that project. I wanted one more opportunity for the board to get together uh and have Scott come explain what process what the options are for funding for us as a school district to fund Dayring Elementary and then what is the recommended uh source of funding for that.
002So at this time I'll turn it over to Scott. >> Sorry I've been riding in the car so I'm going to stand if that's all right. Um, I want to just kind of go through a couple of things on the district's financial review to make sure that we're kind of on the same page of where money comes in, how long your millage is on the books, and then what are your options for borrowing money at change. And so on the right side of your packet is this uh got the little icon on the front. It's the district's financial review. And I'm going to go through it, you know, like five minutes or less. If you have a question, just stop me and I'm glad to go into some more detail, but I think you're familiar
003with most of this information. So, on schedule one is >> Did you have to bring one? >> There's one extra right over there. >> Sorry. Sorry, you're looking at my best side. Sorry about that. Swing around here. your assessed value. And as you guys are aware, here in this part of the state, we're experiencing large increases in the assessed value. So, you're up almost 11% for the 2627 school year um to $631 million. Uh that means that you've been growing at almost 9% um over the last five or six years, but it's really increased the last two years as those reappraised values are being placed on your books. And so the new cycle in Arkansas will be every four years property will be reappraised. So we've done two years, so we'll have two more years
004and then you'll reappraise again in the third year. Um, keeping in mind a little math trick. If you live at the 631 million, if you slide your finger to the right where the 4,000 and then the comma, if you make that a decimal, that means that one mil generates $631,000.79. If you want to get into the weeds, if everybody page one, blue line going across, and the total taxable value is 631 million. >> I see that you said go to the right somewhere. uh where the 4,791 is. Just make that comma a decimal. 4,000. Show me on mine. >> That's right. >> You know, something that I've said so many times makes so much sense in my brain and then I say it out. >> Oh, I see what you're saying. Okay. Okay. >> Um,
005so that's >> the last four digits >> because a mill is 01. So just move it forward three three places. >> Okay. So, I think sometimes it surprises schoolboard members, particularly if you've grown up here, to think that everything in Sylum Springs, if Elon Musk came in and wanted to write a check check is worth $3 billion. If he was going to buy every home, every business, everything with a tag on it, and every utility that goes through, the assessor says that it's worth three billion. And, you know, we assess it 20%. So that's the $631 million that you get to charge taxes on. And it just wasn't that many years ago that you know you were a third of that half of that. I mean how much stuff has grown up here? So each
006mill gives you over half million 631,000. So, if you were saying we need a half million dollar in new money for either a debt payment or for teacher pay raises or to pay the light bills, you know, 1 mil from the taxpayers gives you 631,000. Does that connect with everybody? Okay. The next page is the tax rate. So, the voters have approved your millillage and it is approved through 3839. So if the voters say no every March for the next 13 years, it does not matter when it comes to your millillage. When a millage is defeated, it reverts to the previously approved year. And so you would not have a decrease. Now if you ask for an increase and they say no, you just stay the same. So uh only changes uh that are approved
007impact it. Now, if we get 13 years down the road and the voters say no, then your millage would drop to 25 because the state says you have to have 25 M mills at at a minimum. You can't operate at that. So, we would we've got 13 years to have the voters approve an extension. Your total is 44.2 mills, which is kind of average for this part of the state. The state average is 39.3, but up in Northwest Arkansas, it's a little bit higher. Next page is local collection of revenue. Not everybody pays their taxes and you can only spend what you actually receive. So the column that says collection rate is the percentage that you have been collecting right around 95 96%. Not to put Terry on the spot, but what percentage do you
008use to budget? >> 94 94. But it is always better to have a little bit of extra. And you can see you've been close to 94. um it's been a couple years 19. >> Um so you just want to make sure that you've got a little bit of of a cushion there. The state trus you up on the first 25 mills because the funding formula says everybody gets 98% of the first 25 mills. But because you have mills over that, you just get what taxpayers pay. So you want your collection rate to be as close to 98% as possible. Next page is your bond issues. And these really just all go back to the high school, but we rolled everything together and then we refinanced it when interest rates drop. So you if you look
009at the third item on there, which says interest rate coming from the top, it's bonded date, original amount, interest rate, 2.19% on the large bond issue and 1.37% on the $8 million. So to answer your question about interest rates, I don't think we're refinancing this anytime right now. would be 3 and 12 to 4 1/2%. >> Wow. >> So, we're thrilled that the district was able to lock that in. Um there may be some point close to the bond issue paying off, say in seven years, that we might would look at restructuring some stuff, but right now we just don't want to touch that those low interest rates. So, the blue second blue line shows that you're going to pay in the upcoming school year $3.2 2 million a year in principle and interest on
010your bond issue. If you turn the page, this is non-bonded debt. The state allows school districts to borrow money for up to 10 years without voter approval and not as a bond issue. And so, here's one of the options we're going to talk about. Sometimes schools will borrow money for it's called a revolving loan and you borrow it from the state or it's an installment contract. you get it from RBST or a local bank. Um or um let's see installment contained warrants. The limitation on non-abonded debt is it can only go two years and the interest rate is almost always higher than a bond issue because a bond issue is rated. It has the state intercept program on it and um it just normally gets 50 to 100 basis points lower interest rate. So right
011now the district's millage is out 13 years. So when we talk about a second lean bond, you can do a 13-year bond issue because you can't go any further than the voters have given you permission to borrow or you could do a 10-year lease purchase. The reason we're not going to talk about the lease purchase is it's the interest rate is going to be higher and you can borrow for three more years as a bond issue. Um, but I'm glad to go into more detail on that if anybody wants to to probe around on >> I want to point out that that we have not historically done any type of non-bonded debt for the district. So the I think I take this as a positive that the district has never done something like this because
012you take that all on your own when you do that. Like there's nothing out there to >> there's no new revenue coming in. >> No revenue. It's just a other than just the loan basically that you're getting. >> We will see them typically for school buses. If a school can't afford every year to replace a bus or two, we do lots of school bus leases. Um, we sometimes do them for shortterm, three to five years for Chromebooks or Apple. Uh, we'll do small construction projects for them. Um, sometimes solar panels or new lights. Um, but typically if a school district has a long-term capital plan, when this page is blank, it means that you're meeting all your capital needs and not having to f finance them, which is the most efficient way to do it.
013But not everybody can do that. you just have been able to budget accordingly and aren't using that. At the bottom of the page is a percentage that is the total amount of principle on the two bond issues outstanding divided by your assessment. So you have a very low percentage. Um state average is somewhere around 13%. So you're about half of that. I have some clients that are in the high 20s and some that are in the low30s. Typically, that's a place like Cabbat or Alma that doesn't have any industrial base and they have a lot of students and they get kind of because they have to keep building new facilities. They get out of whack in that percentage. The state doesn't control how much debt you have. It's what your voters will approve, but it
014is a statistical measure that would say this district does not have a lot of debt relative to its number of students and its assessment. Okay. The next one kind of explains why you can do a second label. So, I'm going to spend a little bit more time on this and then we'll we'll go to questions. The revenue available for debt means if you take your assessment times your debt mills times your 5-year average collection, the district we expect to receive this school year 11,727,429. Your debt payment is only 3,278,000. So that surplus or leftover automatically transfers to unrestricted M and it's $8,448,830. You have $3.58 in revenue coming in for every dollar that you owe. And so you may ask, particularly if you're a newer schoolboard member, why do we have all of our mills
015over in debt? And it really goes back to the 70s and some old funding formulas that existed prior to the current funding formula formula where schools got it was a better advantage to have all your extra mills in debt and because the way state law is set up when you make your debt payment this surplus Terry just transfers it over to unrestricted M and you as a school board decide how it's going to be spent. So it really doesn't matter to you whether it came in as M mills or excess debt mills. It all gets spent the same way. The advantage of having it over there is now if the board wanted to borrow, you have a source of payment that can be used to make a a a bond payment. So you could really
016go out and borrow 70 to $80 million legally because you have enough money to make the debt payment. Now, Terry will shoot me for those words coming out of my mouth because she can't cut that out of the existing budget to make the new debt payment. So, while you have the ability, it's like having a credit card with a big credit limit on it. You could go out and get that, but then could you make the payment on it? So, we're not encouraging you to do that. We're just saying that you have some flexibility. If the board and the administration have a payment that you're comfortable working into the budget, then you can pledge that to a new bond issue without going back to the voters. Because if you need new revenue to make a
017debt payment, then you have to go to the voters and get them to increase the debt mills. If you feel like you can carve a debt payment out of your existing budget, then you can issue a second lean bond and not go back to the voters. So, does that click with everybody? Cool. Now, the state is involved and part of the reason we're having the workshop today is to give you a chance to think about this before the July board meeting because the state does financial matters on oddnumbered months. So, you submit paperwork in evenumbered months. So, if you meet in July and the board decides to go forward, then you have to publish a notice in your paper and then you have to submit the paperwork by the first weekend in August to be
018on the September state board agenda, which means that you can do the bond issue in October. Otherwise, it'll be December because we kind of we're on this odd even month cycle with the state board. The state board is not going to evaluate if you can afford the payment, if you need the project, or it's a good idea. They're going to evaluate if I filled out the paperwork correctly, and that it will be on the consent agenda. >> Okay? >> But they you we have to have their approval. So, we have to follow their timeline even though it's really it's a paperwork thing. The other paperwork thing is our reporter here. You're going to put one notice in the local paper that says, "Hey, we're thinking about doing a second leak. If you want to comment
019on that, go down to the to the county and register your comment." When 14 days is up, we'll ask the county, "Did anybody say anything?" Please give it to us in writing. We're going to submit that to the Department of Education. Um, rarely does anybody comment? And if they do comment, again, it's on the consent agenda and it's not part of the process, but the public does have the opportunity to comment at the county if they don't think the second lean bond is a good idea. >> That comment would only be addressed to the state board, not to us, >> right? >> Would we know what that we would just send you a copy? And I haven't had one for 10 years. >> Oh, really? >> September. Oh, wow. >> It's too much trouble. >>
020Does it say law to publish it? And so we do it. looking at it on Facebook. >> All right. Um, next page. I'll just It's the funding formula. I think you guys are aware of this as we're talking about potentially increasing expense. We we want to just address decrease in revenue at the same time due to the loss of students. So you're going to be down 267 students from a funding perspective for the 2627 school year which is almost 6%. Uh I have been kind of trying to get a better understanding of the learn's impact on school districts and my sort of generic statement would be I see schools down on average about 3%. But it is a huge range of like Bittenville is up some of your neighbors are down 3% some are down
021more than you are. It's very much across the board and it's really hard to identify is that private school voucher, is it homechool, is it just people moving? You know, I don't think we have enough data yet to say why is this district 6%, this one's 3%, and this one is up. But um we are seeing on average Arkansas school districts have fewer students for 2627 that they're being funded on because they had fewer students last year. So you are not unique in that matter. What does make you a little bit unique is that your assessment is growing fast. So from a statistical standpoint, the state says you're getting rich because you have more local revenue per student than you did last year. So if you will look at line 12 and you can see
022four years ago you brought in $2,613 per student. Then it went to 2775 3120 and this year 36.82. the total amount of foundation aid to some degree doesn't matter to the district whether it comes locally or from the state because everybody gets to the same amount regardless of the mix. Um where it does matter to you a little bit is like on partnership and other things that are based on your wealth. So, if you drop all the way down to line 35, your percentage of any new approved academic facility has gone up about 3 percentage points because you've gotten statistically wealthier. Now, it's helped you a little bit that the wealthiest school district also got wealthier. So, it sort of pulled everybody up, but they gapped above you more. >> So, can I step in
023right here for just a second? So that wealth index where that matters for us is you know we've applied for facility funding whereas if you go back and look in 2425 ours was 39.49 49. What that actually means is that that's the make sure I say this right that if it's if you just looked at that number out of a 100 that means we're going to have to pay 42%. >> Okay. >> Of they would fund us at 38. Is that not a number right? 48%. No. What am I my number? 58 58%. Whereas before, because we got richer, we're going to get less money from the facilities in the funding because of that. >> You'll get $30,000 less for every million dollar you spend, right? Because you're you're richer. Um, now I do want
024to point out to the board and we've talked about this before, but we have anticipated this loss of students and we have worked hard and I have some preliminary numbers that are I don't necessarily want to throw out there, but we have tried to be efficient and with this transition to neighborhood schools, we've been able to eliminate and when I say eliminate, I don't want anybody think nobody got fired, but as people left the district through retirement or the resignation. We realized there were some staff we didn't have to. So, we've cut expenses in the anticipation that we're going to lose uh the we've lost this enrollment. >> So, you used attrition. >> Attrition. Yes. >> Can I ask a question on state wealth index? >> So, we went from 47.7 to 44 to 38.
025We're going down. So does that mean like we're in the 85th percentile of richest schools or is that line eight? Yes. So that used to be when the funding formula was created a metric they used for a number of state programs on the percentage you got. So if those state programs still existed instead of getting 40 something% 47% of every dollar available you would only get 15%. Okay. The good news is almost all of those programs have been eliminated or sunset. We're just tracking it because um you don't have it, but bonded debt assistance is still out there. So once the last of those school districts have gone away, we'll stop tracking that because the state doesn't use it for any other category. >> So it's been tracked but it's not necessarily an accurate data
026because a lot of program >> it's accurate but it's it doesn't negatively impact it doesn't trackly. Yeah. Correct. But it just gives you a sense of how much more revenue you're generating per student um than you did four years ago, particularly relative to other school districts in the state and how much the state is putting into education. >> So your taxpayers are bearing a larger share of it. >> So it's nothing about a percentage of where we are versus schools. It's more of just a >> the one that does give you is the bottom one we were talking about the partnership um line 35 >> if you remember in school when your teacher would use the bell curve and you kind of got everybody to the middle >> this percentage is called the federal range
027ratio um and what it says is that we want to make things equitable but we we're not going to bring everybody to the most expensive school district 100% because there's always some weird outlier in any type of >> sampling. We're going to bring everybody to the 95th percentile >> that throws out those top outliers. And if we bring everybody up to the 95th percentile, then that's fair. And that kind of passes some federal standards of fairness, defendable in court. Yep. >> So, the state chose this to say if we take every school district and we put their assessment up there and divide it by their number of students, that's kind of how much revenue you can get per student. And sometimes the 100th the 95th percentile is Bittenville. Sometimes it's Little Rock. It kind of
028has it moves around depending who's growing. But the state is bringing you up by having you pay 42% of your new building. That should make your millage equal to the 95th percentile. >> Okay? >> And that's why when you get wealthier, the state gives you less because now they're they're just moving everybody to the 95th percentile. >> Will the the private schools be part of this metric at some point? >> No, because they don't receive facility. >> They just receive the voucher only, which is a percentage of the foundation. >> Um, and charter schools, which are public schools, don't receive this. They're in a different pot as well. Thank you. Because they don't have a tax base. >> All right. Um we're going to go to the single page that's in there now and just
029kind of tell you a little couple things about second leans and maybe then you can tell them what amount you want us to put on the application. Project funds is how much you're going to net out after the cost of issuance. And so there are just seven options. I'm not saying any of these are what the board is going to end up with, but it just gives you an idea of what the payment would be. And the estimated annual bond payment is the payment for the next 13 years. Now, Cherry and Shane, I have assumed, unless you tell me differently, that for 2627, we don't need a full debt payment. We just want interest only. And then we'll kind of work our way by year two into it. Um and if you we will talk
030about that as we get closer like oh no I want a little bit more in there so we can fine-tune that in office. Okay. But the annual estimated annual bond payment would be how much you have to work into your budget. So if you as a board said we're not comfortable after talking with the administration with anything more than 2 million then really the most that you could net out would be about $19 million for projects. So, do you want to talk a little bit about how much you think you're going to need? >> So, as I've said to the board, we uh we've been talking with Mike and Kenco and and all and I have I have said all along and they have told me all along that we have a pretty good idea
031of 15 to $18 million is what allin uh would cost. I mean, who knows? like as we move into this what things come up but uh that's the range we're looking at uh somewhere between that 15 to 18 obviously we always want to be closer to the lower number if we can >> um as uh I think I had mentioned to the board I take a little bit this is different view and Terry and I have talked about and the team talked about when we talk about 15 to 18 we're talking about allin cost we're not just talking about brick and mortar cost on site. We're talking about architectural fees and all the other things that go into that, including furniture and fixtures that you have to put in there. I don't want this to
032seem like it's I want to make sure that we're transparent with the public that we are this is the total cost of renovating this space to make it an elementary school. Uh now some of the drivers that go into that where that comes from is the PO which is uh the state tells us what the school has to have like you have to have this number of classrooms they have to be this size you have to have this number of offices all the things that you have to have including a gymnasium and a cafeteria and how you do that and then a big driver in cost right now in the last few years that we've not dealt with because we've not built a tool since this went into effect is the storm shelter. The storm
033shelter is adds about $200 a square foot. I mean, it just does. I mean, when you talk about >> the whole project >> into the whole square footage, not just to the storm shelter. >> Correct. >> Wow. Because when we're not just talking about like when people think sometimes they think about a storm shelter, they think about well it's got reinforced walls and ceilings and you just go in there and everybody Well, that's not really all it is. It is has to be mechanically ventilated. It has to have restrooms and sinks, washing, handwashing facilities for the number of people that it's ho uh house that it can house. And then so we might say that there's going to be 500 people in this building, but what they go by square footage and we're probably going
034to have to build it for like 700 because they say, "Well, I know you say that's what you're going to do, but our our calculations say you might have more than that." So, one of the things we've talked to KCO about and they're and Mike and the Kinko are working together. What is the most efficient way to do that and and get that cost as low as possible? But that is a huge driver in this facility and I just wanted to to bring that. But we're really looking at 15 to 18. Now Scott will tell you on the paperwork and he's told me you always put on the paperwork more. You can always say no later and you can always lower it. But if we put 15 and we get to November, we can't say,
035"Well, we need two more million." Mhm. >> We can always come down, but we can't add. We'd have to start the whole process over. >> So, you're asking the state for the maximum that you might borrow, but you're not committing to borrowing any of this. The board can cancel this process all the way up to the bid date, and the only expense you would have is the one publication in the newspaper. Um, the legal fee, our fee, all the fees are all contingent on the school district closing the bond issue. So uh generally we will say 20 million maybe is too much but add an extra million or two go through the process and then 30 days before we start fine-tuning everything we'll have a conversation of how much principle do you want to pay
036in the first year what's the maximum you want to net out and all the fees and everything are based on the size of the bond issue. So, as you decrease it, just everything goes down. And then we'll actually borrow what you think you're going to. Um, and I always tease and say, "Don't tell the architect either of the numbers because they'll always he's not here to defend himself." So, um, uh, but it is I just over the years I'll have somebody say, "Well, we're not going to do any more than 15." And then we we get right up to it and they're like, "Man, I really wish we' done 15.2 million or 15.5 million." So we generally will say pat it a little bit it so on the paperwork and then come August or September
037you guys decide okay this is all we're really comfortable borrowing and we'll drop it down to fit what you want. >> So is there a disadvantage to just saying we want to apply for the max >> and then because we have the right to drop it down. >> Yeah. I mean, I don't want to put 70 million on there, which is what you could borrow. >> Sure. But like you said, it's kind of a it's a rubber stamp kind of kind of deal. >> You're saying option three. >> Is that what you're meaning? >> No, I'm just saying like if you took option seven is that we just applied for 27 million by the time >> stroke out and say I don't want you to consider this for my own information. >> There would be
038no no problem from a paperwork standpoint. >> Okay. saying >> and there's no committal, >> you have to borrow it, >> right? So, so there's >> by December whenever we actually have to do this. If we've got really good numbers and it's showing, you know, 18 is all in on this cost on it. So, we can go back down to the 19 and say, "Hey, we feel really good about this." >> But we could ask for the 27. >> Okay. But is there an advantage to that? >> No, there's no advantage other than how much how much padding do you want to have on there? My fear is if we do too much then if that gets out that the contracts and the bids and >> so it's like we don't want to act like
039we have more money than we really have because it's amazing how bids fit what you think the budget is sometimes. >> Great great point. >> Yes. >> Well, and I think there's another there's another factor in that. I think there's some there's some stewardship of the the board and the administration not setting ourselves up for the public to think that we might do something that is unreasonable. That's totally agree. >> Yep. >> And all because I I don't think we want to do anything like we literally and from the administrative standpoint >> and and perspective, we literally want to borrow. >> If we can borrow to the penny when we need, >> we don't want any extra. We're not trying to do anything else. Like there's nothing else. We're trying to get a little more
040money. We'll get a little more money. We'll go do this. Like that's that's not what we want to do at all. And there is a and Terry will tell you there will and I agree. I'm on her team on this. There's a certain point where it's like I don't feel comfortable having to make that bond payment and still be able to think about raises and bonuses and and running the school district down the as we move down the road. I will say, you know, every time we open up another another business, every time we open up another neighborhood, our property estimated values are going to continue to rise. And we've got a lot of that going on. So, I don't see our revenue going down anytime soon really. But I do think we need to
041be good stewards with the district's money and not overcommit to something that puts us in a bind with our personnel that doesn't allow us to do things like give a raise down the road at school. >> That's great. >> Yeah. >> Just to clarify, I think Scott said um that the only thing we'd be on the hook for was the posting in the paper. Now, didn't we in the last board meeting approve that we were going to pay Kinko that fee? Didn't we? >> Well, that's that doesn't have anything to do. He was talking about just this. We have committed if we pull the plug on the project, we don't borrow the money and we tell Ken Ken Co to go away, then we would owe them $40,000 for their precon work. >> Right. >>
042But other than that, uh they're in the newspaper ad. >> Correct. >> Like technically, I don't know that we would even owe I don't know that we we don't even have that precon deal in Mike's contract that I'm aware of. So, we wouldn't even owe Mike for the work that he did if we pulled the plug on it. >> And we also the other thing I I wonder about, you know, how it's always you approve it now and then once you start ordering material a year from now or whenever with material if there's material cost increases, do we feel good about these numbers? We're talking is this good for I don't know what the timeline is. Are we talking >> Well, that's the thing about it is when we it's And I I say this,
043we were just talking about this this morning with the team. You have to think about this so much different than you would if you were a business or if you were a uh an individual doing stuff because the timelines and the way they have to work like you have to do do I feel good? Do the does KCO tell us and Mike tell us that what they're seeing across the board are there's going to be some raises or increases in some material? Probably so a little bit. And it's kind of they've kind of tried to figure that in. The good thing about all of this, we can pull the plug not just on what Scott's talking about with second lean bonds, but we can pull the plug on the if we get to the GMP.
044And it's just we can't do it. Like there if you can't write the check, you can't write the check. So we would have to back off and regroup and figure out what go from there. And then at that point, we would probably have we got to that point, we would probably have to go back and say, okay, we're going to have to ask for a millillage to do this project. in my industry, steel industry, it's um July is going to have probably like a 6% increase is what they're saying, but then after that pretty flat. >> Yeah. >> So, >> and I think what Ken told us, >> I don't know what all the other >> across the trades, across the materials, across the board, they're figuring about 3%, some they said would be are
045actually going down and then some are going up. So, still if it goes up six, then they're it'll be all it'll be balanced >> on that. But they are figuring about a 3% is probably what they're thinking over the >> They're kind of >> anticipating that. Okay, that's good. >> Scott, you said I want to make sure what Shane said matched your when you talked about we have to pull the plug. You're talking about bid date that that bid comes to the board for approval. So that's because I'm glad because I didn't know you were going to be out with the the contractor. So when I said the only expense you'll be at, I was talking about the bond the borrowing the money, >> right? Okay. >> That all of the fees related to the
046bond issue are contingent on closing the bond issue. So, if we got state board approval, we put together the bid package for the bonds, we sent it out, and at 11:00 on whatever day we got in seven bids, and you either didn't like the interest rate, or that morning the contractor called and said, "It's up 20%." And you said, "We reject the bond rate," then we would reject it and you would only owe the publication from our financing portion. >> Okay? So, one of the things you may be looking at is do you want to get bids from the contractor or firm up any pricing before we get to the bond issue so that you can match those two things up a little bit. >> Which is why the timing of this because the state
047board only does it every other month >> met now. That's why we need to do this now cuz I'm hoping that we have a GMP by October a good idea about October no early November and that would put us in a situation where we would have a better understanding when we got ready to and maybe sooner but it's a lot of it's go the work's going to depend on how fast Mike and the engineers can get stuff put together and all. All right. I think y'all have one other thing to talk about, but are there any other questions about second lean when >> I do? >> Okay. >> Um, so well, the first the first question I had probably was um it was more uh more in light of Shane saying, "I want to bring
048Scott to you one more time." I've just set the context here. Shane said, "I want to bring Scott in front of you guys one more time. I want to make sure anytime I hear that someone needs to tell me something twice, I think, what do I need to be cautious of or aware of or, you know, is there something I just want you to speak plainly to us and and if there's something we're walking into that you see as a concern. >> Um, that's maybe just a statement I'll say and and just allow you to respond to that. My context for my conversation was, you know, Brian's rotated off the board. Marian's done bonds before, but I want to make sure that my board is comfortable. Great. >> And not have you come to a
049public meeting and them not know what a second lane is or understand what I'm asking them. Can you He wanted me to do this in July and with with the timeline of the state board. I'm like, are you okay if we meet in June? >> Yeah. and that way they can ask their questions and we get to the board meeting. If they have more, they have a second bite of the apple. That was second leans are very normal. We do them all the time. Um so from my perspective, there's no additional risk there. It's really um is the administration sold you can make the payment >> because if they're all nodding, yes, we can afford it. Then the board's morally comfortable. Okay. >> That's great. You answered another one of my more specific questions there.
050Uh the only thing what would have to happen for this to all go wrong. >> All right. >> How big earthquake would we have to have? >> The things that I see go wrong with bond bondage whether they're election or second lane and he referred to this a little bit is unfortunately the way state law is set up for schools. You go through this process if you tell the public, hey, we need this new elementary. this is what we estimate the cost is going to be. You borrow the money and then you put it out for bid. That's not the way you or I would do anything. But technically, the school cannot accept a bid if they don't have the money to make the payment. >> Okay? >> So, it is by tradition, it's been
051viewed that you have to have the money in the bank. Now, at a district this size, you have some other reserve accounts. you know, we might could get close enough that you could say we have enough in the bank that we could take the bid, know that it's firm, and then do the bond issue. But that's kind of the tension that we often fight is that the school is borrowing the money before they know the cost. So, let's say we borrowed 19 million because the contractor said, "I feel really, really good about that." And then 30 days later, it's 21 million. That's the problem that I have with clients is, "Okay, now we're 2 million short. what are we going to do? And so, usually there's two thing, one of two tracks. It's we're going
052to value engineer the building and we start cutting out stuff and then they're not usually happy with the building >> or we're going to go back in 6 months and do another second lean for $2 million and squeeze something else until our assessment grows enough to make the payment. But uh unfortunately 30% of the time and the school doesn't have enough money when the bids really come in. That's to me the always the big risk in how we do these things. >> Okay. Explain that. >> That seems silly that we would have to have the money before we accept the bids, wouldn't it? >> Because you're legally when you sign the bid, you've now said we have $15 million. Well, you can't say that we have $15 million if you don't have $15 million. Now,
053I don't know how much you have in your building fund and your all your carryovers. A district this and it's maybe close enough we could hedge that and maybe we'll have that conversation, but that's usually the timeline we're trying to be in compliance with. Make sense? >> When would when would the project start ideally? Well, we want to start before Christmas if possible, but I have learned in the construction business through everything else that goes on that you usually don't get to start when you want to. So, you know, that's the goal, but reality, if we make the goal, great. But if we can start sometime in January, I think we're doing a doing good. So, some other things I want to bring to the board's attention while we're talking about this on financing stuff.
054So, we we have the property on Kinwood. So, I'm looking at other sources of income to help along this way. We have the property on on Kinwood that the board's authorized me to work on selling. And I'll have a I'll have a better report for you later. I'll have some information for you on that. I am working on that. And I think we might have a buyer lined up. We're waiting on an appraisal to be done to make sure that we get fair market value for the property. U we have applied for, as you know, some of you been down there with us to Little Rock to those meetings. We have applied for facility funding. We have worked with the state and I'm very appreciative of the state department for working with us and we've
055reworked our application and so even though the application is for north side and southside down the road because you know once again with the state what you're you're applying for something you're going to do two years over two years from now two and a half years from now if we get approved and I I think we're going I mean this is my opinion I'm not even going to say hope. Amy talks all the time about, you know, hope's not a plan. >> I feel very confident we're going to get approved. There is a caveat in the way the the rules work. You can re you can redo the scope of it and we're going to petition once we're approved to redo the scope of that application to help fund some see if they'll let us
056move some money over to Dayprint. So that's another opportunity for us to come up. Now the downside of that, we still have to have the money up front. >> Yeah, >> it'll be a reimbursement. So, but there are some other streams of revenue that we're looking at that are significant. They're not like 10 or $15,000 streams. There are some significant streams of revenue that will help us. And so we're looking at every option we can in order to do this project and still run the district effectively. That makes sense. >> Terry, when does this payment um when is this payment due at what time of year? >> We pay interest in the fall and then in May, April, we pay interest and principal. So we only pay principal one time a year. said, "We pay
057about half a million dollars in interest in the fall >> and then we pay the remainder principal and interest again in the spring." >> Okay. So, uh half a million in the fall and then May 1.5 roughly. Is that what we're talking about? >> I'm sorry. You're talking about current. I'm talking about potential if we >> Oh, I don't know if we kind of structure it about the same way. Typically, we do the uh smaller payment in the first half of the school's financial year >> so that they have the opportunity to get the October collection in and have the large principal payment due either um February 1st or June 1st so that it's at the end of the financial year. Okay? >> And about onethird of it is due in the first half and
058then twothirds of it or more are due in the second half. uh each bond um only gets principal and a bond is paid off each year and so that's why you only pay principal once but you pay the interest every six months. >> Okay. The one other thing I'll just throw out that will happen um if the board wants to go forward with this, it will be a resolution that'll have the maximum amount you want to borrow um and to submit the application to the Department of Education and to publish the notice in the paper. One of the requirements to go with the application is I have to turn in my um contract for working with the district. And for the first time in 30 years, it's going to look a little bit different. Um
059the SEC has taken over regulating what I my relationship with the school district. And so for those of you uh that are in the financial industry, I've for 30 years I've been your financial adviser. But now the SEC says that I can't say that. Financial adviserss advise two-legged people is what we call them. Real people. Okay. And what I do is I'm a municipal adviser because I give advice to cities, county, school districts. And so I've had to take a new license, a municipal adviser, and because I supervise other municipal adviserss, I have a principal's license. That's why I was joking. I was in DC last week at our regulator. And so as this kind of rolls through my contract, instead of saying financial adviser, we'll say municipal adviser. It's a term I'm trying to
060remember to say all the time. And the other thing that we're seeing kind of as a national standard is that for the last 30 years, my fee has included the legal fee. We pay the Friday Eldridge and Clark law firm to give a tax exempt opinion, saying whoever buys these bonds does not have to pay federal taxes on the interest. And if you live in Arkansas, you don't have to pay state tax on the interest. That means you get to pay a lower rate of interest. And you need an outside law firm to issue an opinion to that effect. And as part of that, they put together the bid documents and everything. Well, we've always paid that. So, when you hired us, it just was the package. Well, the SEC wants transparency in all um
061contracts. And so, um you will see when we get rehired that the Friday firm will be separate and their fee will will be transparent. It's normally 20% of what I charge, but you'll see that. And so my fee is going down 20% because you're going to write a separate check. The net effect of the district is basically zero, but we are breaking it out. So it'll be a little bit of a longer sentence that those of you that have been on the board, it's like why are we doing this different? Cuz we're complying with our regulation. And once again, Scott doesn't make any money unless we he unless we actually sell unless we do a bond. >> So I motivate him. >> I guess I say all that because all the trips that come up
062here, that's part of what Scott that's a service that comes along with because he's our municipal adviser. It's not a like it's not a fee every time we bring him up or anything like that. >> What other questions do we have about this? And these are not the only amounts like we can get super these are just estimates generic for payments. We can get super specific is spec down to the penny if we want to >> other than bonds are in $5,000 increments. So you can you can get that go down to the penny. >> All right. Well, thank you for your time. I wish we could go longer cuz I'm going to go help my son move into a red house on Weddingington Road and we'll have >> I was hoping if this took
063a long time that we wouldn't have to help too much. He supposedly has some friends. We'll see. >> So was pizza. >> Appreciate you. >> Thanks. >> The only other thing is that I had unless you guys want to have some more conversation about this. We absolutely can. uh is and it's not really an action item. I just need to know who needs who wants to be a member or if you want to continue to be a member of the state required wellness committee. We that's >> you've been on it I think two or three years >> what I don't I'm not sure and I it doesn't matter but somebody's got to do it by law and we I just need to know so I can tell Tiffany so she can start putting whoever is
064going to be that person on the list. >> I've been fine doing it. Um, I've been fine doing it. I'm fine to continue doing it. Um, unless someone wants something like that. >> Makes no difference. >> All yours. >> Okay. It's all yours. I'll make sure Tiffany knows so she can set those meetings and get get them on your calendar. Great. >> Uh, does anybody have any other questions about this for Terry or I without Scott in here? No, I obviously my first time going through the second lean bond contest. So I like >> it's all of ours because our first one to do Oh, district's never done before. >> Yeah, I feel so bad. >> But by the time we get down to this, we're going to have a what we think is a
065pretty good idea. So >> they know. >> Yeah. >> Tyson with Ken Co and and Mike know >> if they show us show up something up here over $18 million that I've already told him that it ain't happening. >> Yeah. Okay. That's kind of the next side of that. It's like cuz he'd mentioned, you know, we borrow it 20 and it shows up. >> Now, I do think it I I would and Terry and I we had a meeting this morning talking about. I do think it is smart for his like he's recommending. I think we do borrow. We ask for it on the paperwork a little bit more, >> but not like 10 million or whatever more like a million or two dollars more than we think it's going to be to give us
066some flexibility. But I don't I don't see that happening. And it would be like I would have some heartburn asking you guys to do that. And it would I'd have to have a lot more conversation and we'd have to do a lot more studying to see if we can do anything over 18. One thing kind of in light of that, um, I appreciate that you've kind of given Kimco some boundary there. Um, I'm just thinking about how are we going to know comps on what like a square foot number might be a good if we were going to build a brand new building, we'd probably go out and find very easy to find comps. >> Well, there's a lot of schools in Northwest Arkansas that are doing something similar to what we're doing. Okay. And
067Kimco just is like they're doing one now in Springdale. So they took a school and they're remodeling and adding on to it. >> And so we we were able to look at what they were and they like just had the bid day what 3 weeks ago. >> Their bid day was 3 weeks ago for that. Uh yes for >> cuz it was the day we had we had lunch with him and and he had left our lunch to go to the bid opening and so >> so we will have some >> we'll have some comps of what's what it's in Northwest >> Arkansas right if we say don't come in here with a number more than this and then we can also compare that to a square foot number based on other comparable okay >>
068have some folks going in front of us kind of doing research for us >> that seems like yeah >> is the Springdale school having to add the the storm shelter as well >> yes Is that based off of like a radius around that school of how many people? Because you say 500 people, there's 50 like community. >> Just for the school, just for the school. They have a formula, but it's so many people per square feet. >> And it doesn't matter what those square feet are for or what you say you're going to put in the building. >> It doesn't matter. >> You I'm surprised you made it that far. Yeah. Right. >> Okay. So, it has nothing to do with the public. No. And what happened is it's all in in the international building
069code >> when the state uh legislature passed that school districts had to follow that >> across the state that honestly and who I mean we want kids to be safe but nobody knew that was in the building code. >> Yeah. >> When they passed that law. >> Huh. It got pushed through and it got passed but nobody knew this this was in here. And so the state is still scrambling because their facilities funding formula is does not meet the needs of a like they doesn't cover that kind of cost. >> Wow. >> And so they're trying to figure out how do we do this and so uh it's just been a problem but it's the law and so that's what we have to do and >> there's been a lot of thought about how to
070get around it. >> Yep. >> And Mike said he would walk. >> Yeah. If we told him if we told him to do something didn't meet code. He said he just he couldn't do it. So >> we're going to have to and we don't want to do that either. >> No, for sure. >> So pass the law and then figure out the tornado. >> It's an like fault anybody. They thought they were try basically what they were trying to do is get everybody on the same standards >> but nobody fully had vetted what is all in these standards. So when they went to the ICC it uh that was one of the caveats, but who's going to who doesn't want to keep kids safe, you know, >> you just have to it's just part of
071it. >> Is it is it one of those and I can keep going back to this community cuz I've seen some of those to where if the sirens go off those doors unlock? >> No. Okay. It is not a It is. So we're not >> We have not applied for a there. FEMA has quit has made it really hard to get a FEMA grant to do these things that those community >> okay >> deals you can't hardly get one anymore. There was a time when you could do that kind of stuff but that this is not what this is. >> Are these shelters multiunctional where they can be used as other things your gym >> be your gyms be your hallways >> classrooms and we in our new safe room is the the gym. So
072after the tornado when they had to install the new safe room to code like Shane was talking about, it's it's a practice gym that's on the back of the fieldhouse. So it's it's meets all those ICC standards. >> But you're talking about like the doors have to be storm like storm rated heavy like it's crazy. So it's not just block walls and concrete ceilings. It's all that. It's everything that drives that cost up. Y That was That was good. That was helpful. I don't feel like that was redundant. I feel like I >> I just And I hope you I'm sorry. I I don't want to scare you. I just want to be overly informational. Like I just want to make sure everybody truly understands what we're doing. Not just this group, but our public,
073too. So, when people ask you, "How are you doing this? How are you paying for this?" like you you know 100%. There's not a it's not a guessing game. Well, Shane said we could do it type deal. >> No. Ask Terry. >> No, don't ask Terry. Ask Shane. >> So, all right. Unless y'all I mean I know we have to adjourn, but unless y'all have some other discussion items, that's all I had for you today. Second pass. >> All in favor?