Fluvanna hopeful on bond deal

By Bryan McKenzie

Published: November 20, 2008

Results from recent government bond sales across the state have Fluvanna County officials hopeful that their proposed December debt sale to fund the county’s new high school will be successful.

A local taxpayer organization, however, is hoping the board will consider postponing the bond sale until the economy rebounds.

Officials postponed the original Sept. 25 bond sale because the stock market had plummeted just 10 days before and large investment banks foundered, creating a credit crunch. But county officials say recent sales have them hopeful that the school bonds can come in at or under their approved maximum interest rate of 6 percent.

Supervisors said they would not accept anything higher.

“There is some information throughout the state that indicates [bonds] are coming back with interest rates under six percent, but it’s still speculation at this point,” said Supervisor Gene F. Ott, of the Rivanna District. He said the board is not prepared to pay more than six percent.

“We have not authorized any [bond issue] at a rate higher than that,” he said.

Lee True, of the Fluvanna Taxpayers Association, said the group is concerned that the bond-created debt would be too much.

“Fluvanna is a county with about 26,000 residents and not all of those residents are taxpayers,” True said, noting that the county relies heavily on property taxes for income. “We think the county needs to reconsider and wait until there’s an economic recovery.”

Bonds are like home improvement loans. Governments sell them to investors to generate money for capital improvements and operating costs. The bonds are paid back, with interest, through tax income over a period of time.

The bond market has been unstable and has changed with the rest of the economic landscape, said G. Cabell Lawton IV, county administrator.

Shifting strategies

“Since Sept. 25, investment strategies have changed, the economic situation has changed and the explanations and regulations have changed, and they continue to change on almost a daily basis,” Lawton said. “It’s hard to predict what’s going to happen.”

All is not bleak in the bond market, however. At the end of October, Charlottesville-based Martha Jefferson Hospital successfully sold $160.7 million worth to help pay for a new 176-bed, 456,000-square-foot hospital, including a 58,000-square-foot cancer center.

John T. Casteen III, University of Virginia president, said recent bond issues by the university “sold promptly” and “at the best rates in the market.” Fluvanna officials hope for the same luck.

Although they could lump their bonds in with an upcoming statewide school bond issue, Fluvanna officials want to sell theirs in a separate offering. They predict continued growth will make it easier to refinance those bonds at a lower rate and save the county money.

Fluvanna County hopes the new high school will alleviate crowding conditions from the predicted growth. The school is expected to open in August 2011 and Superintendent Thomas W.D. Smith said it’s needed.

The existing high school was remodeled in 2002 for 1,000 students, but currently serves close to 1,200, he said. The new school is designed to serve between 1,500 and 1,750 students with the potential to expand to 2,500.

The county plans to move middle-school students into the existing high school, move fourth- and fifth-graders into the middle school and leave kindergarten through third-grade students in the elementary school.

Speedy growth

Smith noted that the county for years has been one of the top five fastest growing in the commonwealth. He expects that to continue as the economy rebounds.

“There may be a year or two of slow growth due to the economy, but considering the county’s location, we believe that growth is going to continue when the economy recovers,” Smith said. “This gives us an opportunity to put the infrastructure in place. This is the time to get ready for that growth.”

The final cost of the high school could be less than predicted as slow economic conditions are dropping labor costs in construction contracts, Lawton noted. Should the board have to look at a higher interest rate, some costs could be offset.

“We may be able to negotiate with contractors because construction companies are looking for work,” Lawton said.

Charles W. Allbaugh, vice chairman of the Board of Supervisors, said the school construction project will also help provide county residents with jobs.

‘Need to step up’

“When jobs are being lost, we, as a government, need to step up and this high school project will help put people to work,” he said. “It will also help attract employers in the future who are looking to relocate.”

True said his group is concerned about the impact on existing residents. He said his group would like the county to consider postponing the high school, if necessary.

“Even at 6 percent, that’s $127 million for the county’s taxpayers to have pay over 20 or more years,” True said. “That’s a lot of money for less than 26,000 taxpayers.”