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Bonding cap stymies growing districts like Blair Oaks

Bonding cap stymies growing districts like Blair Oaks

Enrollment gains have outpaced its borrowing ability

February 17th, 2013 in News

For some Missouri school districts, it is possible to simply grow too quickly. That's the quandary in which Blair Oaks School District finds itself. Due to a state law that sets a ceiling on how much a school district can borrow, Blair Oaks' growth in enrollment has outpaced its ability to acquire enough money to build the classrooms it needs today.

Between 1990 and 2003, Blair Oaks School District added 87 students, about six students per year. But that trend changed in 2003. And, in a threeyear span, the district started adding 72 students every year - earning a moniker as the fastest-growing district in the state.

Needless to say, such rapid expansion led to a space crunch.

To address the overcrowding, Blair Oaks Middle School opened in January 2009. Although the new school eased congestion, it didn't address the future growth pattern that was already apparent. The project also left out a ground source heat pump and an auditorium.


Because a plank in the Missouri Constitution prevented the district from borrowing enough money to do the whole project.

According to the law, if an election were held this April, the Blair Oaks Board of Education could borrow no more than 15 percent of the district's total assessed valuation. Which means, with a current assessed valuation of $93 million, the district could borrow no more than $13.9 million in general obligation bonds - and only if voters approve. (No election is planned.)

Because the district hasn't yet retired all of its debt, its excess bonding capacity actually stands at $5.8 million.

But that $5.8 million falls short of the $20 million experts estimate it costs to build a new high school for 900 students and the $17 million it takes to build a middle school for 600 students. (If the cap is changed to 20 percent, Blair Oaks would have excess bonding capacity of about $10.5 million.)

"It really hampers our ability to build adequate facilities," said board member Tim Van Ronzelen. "It's a big deal for us, because we've been growing."

Blair Oaks is not the only district faced with this kind of problem. Other districts around the state have been stymied.

"It's more of a small-school issue. It's especially difficult for school districts that are experiencing rapid growth," explained Roger Kurtz, executive director of the Missouri Association of School Administrators.

In hopes of rectifying the situation, education policy groups - such as School Administrators and the Missouri School Boards Association - are asking lawmakers to consider a constitutional amendment that would raise the 15 percent limit. Rep. Myron Neth, R-Liberty, has sponsored such legislation, although a hearing on the bill hasn't been scheduled yet.

Neth's bill proposes a constitutional amendment allowing a school district to become indebted to an amount no more than 25 percent of the value of the taxable property in the district. It would be a two-step process. First, a simple majority would be needed to allow the district to exceed the debt limit. Second, in the same election, voters would have to authorize bonds to be issued.

"It's a pretty tall standard. It's not a wild-eyed, "Let's give lots of money to the schools' proposal," said Jim Moody, a lobbyist on behalf of George K. Baum, the Kansas City-based investment firm that frequently helps schools with their bonding needs.

If Neth's bill is passed by the General Assembly, voters could change the Constitution in 2014.

Although educator advocacy groups have supported the legislation for years, lawmakers seem more receptive this session, Kurtz said.

MSBA spokesman Brent Ghan said the 15 percent cap has led to a pent-up demand for new construction. Many schools, instead of building what they need, address growth in a piecemeal fashion with additions and expansions.

According to the MSBA, the aggregate school construction needs in Missouri range between $7 billion and $9 billion.

A few districts - South Callaway, for instance - do have high assessed valuations per pupil. These "richer" districts tend to be places with a large power plant, lots of tourism or inherent local wealth.

But most of the districts - 380 - can't borrow more than $15 million.

South Callaway enjoys an average assessed valuation of $326,000 per pupil; Jefferson City's is $137,600 per pupil and Blair Oaks is $86,800.

The problem, said Moody, is that residential rooftops are often not where the bonding capacity is. And rapidly expanding districts may experience a lag between when schools are needed and when assessed valuation hits the tax rolls.

Moody said some observers see the debt limit as a way to squeeze districts' taxing capabilities. "I don't view it as such, because there are other ways to borrow," he said, noting other ways to raise funds - such as lease/purchase bonds - exist, but they may require borrowing at higher interest rates.

"Some think the 15 percent debt limitation protects taxpayers from levy increases and school district borrowing. Is that true? No," he said. "The taxpayer is better served by raising the limit."

Kurtz said: "Some people are concerned it would raise property taxes, but only if foursevenths or two-thirds of voters agree."

In the last decade, the Blair Oaks Board of Education has considered multiple options for addressing the challenges created by the large enrollments.

Superintendent Jim Jones said there are two options: One would build a new school building for a defined grade span and redistribute the grade levels; the other would be to add onto existing buildings to create classroom space. But there's a limit to how many new classrooms can be added, because other parts of the building - such as the library, cafeteria and hallways - become undersized.

Blair Oaks High School was built in 1966. Today, 424 students attend class there.

"Our bonding capacity is not enough to build a high school," Jones told the Blair Oaks Board of Education on Tuesday.

Jones conceded, if the district really finds itself in dire circumstances, it could issue lease/purchase bonds. "But it's not the most fiscally efficient manner" to borrow, he said. "General obligation bonds are preferred."

Van Ronzelen said the district scrimped for several years to buy a piece of land to expand on, and is frugal with other purchases.

He thinks his constituents would be open to more school construction, if given a chance to vote.

"In my opinion, if a community votes in favor of a capital improvement project, is willing to support it and fund it through the payment of bonds, it should be allowed to do so," he said. "The Constitution shouldn't hamper a responsible district."