Committee eyes school districts' bond debt limit

Fast-growing districts like Blair Oaks need more capacity

A House education committee Wednesday considered asking Missourians to allow school districts to take on more debt than currently allowed when issuing bonds.

The measure was a resolution that would put a constitutional amendment on the November ballot to increase the amount of debt school districts could take on from general obligation bond sales from 15 to 25 percent of the district’s assessed value. The amendment would have to be approved by voters statewide.

The resolution’s sponsor, Rep. Myron Neth, R-Liberty, said fast-growing districts run up against the current debt ceiling and aren’t able to make needed investments in expanding facilities to accommodate more students.

“Liberty is one of the most impacted districts in terms of growth, and we can’t keep up with growth,” Neth told the committee. “We stay maxed on bonding, because we always have to build … (The school board) has to get creative in terms of how we finance things, and we still need some extra capacity.”

A handful of bankers testified in favor of the resolution, arguing that issuing general obligation bonds was the most efficient way to finance new construction. They also said that districts with especially high growth in residential areas have smaller tax bases, because residential properties are assessed at lower amounts than commercial properties.

“Districts generally try to be efficient borrowers, but the debt limitation sometimes pushes them to the less efficient methods (like revenue bonds or leasing properties),” said Jim Moody, who spoke on behalf of a Kansas City investment firm.

Superintendent Jim Jones of the Blair Oaks School District also testified in support of the bill. He said the district was fast growing and beginning to push up against the capacity of its existing facilities.

He said the district passed bonds in 2005, 2007 and since 2009 the school board has considered options for addressing the facility needs by over a 25-year horizon. Options include building new schools or adding to existing ones.

“(The amendment) provides communities with the flexibility to address educational facility need, and no one knows the needs more than the local community,” Jones said.

Jones said Blair Oaks has the bonding capacity to build half of a new school now, and they would have to wait to build the second half six years later when the bonding capacity opened up again. The cost of financing a new school that way could be triple what it costs to build all at once. “(The amendment) would provide communities with the ability to efficiently use fiscal resources.”

But some of the House members raised concerns over districts taking on more debt than they could handle and asked who was left to foot the bill if a district went bankrupt with outstanding debt obligations. Leslie Holloway of the Missouri Farm Bureau Federation said the members of her organization had voted overwhelmingly against the idea of increasing the debt limit for school districts.

“Our members are very concerned with districts that may get beyond their capacity to handle the debt that has been incurred,” she said.

When districts issue bonds, they need approval of a two-thirds majority of voters in their boundaries. The amendment under consideration would require the approval of two questions when bonds are issued: one to go above 15 percent and the other with the precise amount of debt being allowed.

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