Local Building Authority Created

I wanted to share some thoughts about the Alpine School District creating a Local Building Authority last night.  I will be totally upfront and admit that I did not make it through the 28 pages of bylaws and articles of incorporation before the board meeting.  But I read enough that I raised some questions and concerns.

Let me tell you what I understand.  The original consolidation plan for Orem went through a lot of tweaks to get to the plan that was actually voted on.  A rebuild of Scera Park was necessary.  But there wasn’t money from the bond to pay for it.  The plan was to sell Hillcrest and use that money as well as some money from capitol funds to pay for the rebuild.  But then some folks from Orem kind of freaked out.  There was a vocal group that made sure that the district was painted in a poor light and “Orem is getting the shaft!” became a kind of rallying cry.  If there is one thing the district does not like, it is bad publicity.  So regardless of if these individuals were posting and using alternative facts, the district got a bit skittish.  Orem residents were given meeting after meeting and the vote was repeatedly delayed and the consolidation plan was reworked.  The sale of Hillcrest was taken off the table, but then there were no funds to pay for the Scera Park rebuild.

So, how does the school district pay for a school without bond money?  There are a couple of options.  The district has a rainy day fund and the district could have just paid for the rebuild out of those funds.  But having a certain percentage of money in that rainy day fund also means that we have high ratings from financial gurus like Fitch and Moody’s.  If we use up that rainy day fund, it can impact our ratings and that would translate into us paying more in interest in our bonds, etc.  Instead the school board created a non-profit corporation called a Local Building Authority or LBA.  The LBA essentially takes out a construction loan to build Scera Park and pays it off over roughly 17 years (similar to our bond repayment schedule).  The LBA leases the school to the district and uses the savings from not having to operate Hillcrest (about $780-800k a year) to pay the lease which in turn the LBA uses to pay off that loan.  It is a way for the school board to be flexible, build schools quickly, etc.  There are definitely some benefits.  But it also presents some questions.  It was brought up in the meeting that the LBA could also fund things like Clear Creek and even rebuilding the district offices.  A school board member stated that Clear Creek was taken off the last 2 bonds because voters did not want to fund those items.  Another board member stated that it did not mean that voters did not want to fund those projects funded, they just had “higher priorities.”  The school board can take on additional debt without going through Truth in Taxation or going through having stakeholders cast their vote on a bond.  There is a lack of transparency as well as accountability.  State law states that the only notice the board had to give was 24 hours public notice.  That was it.  No public hearing or comments.  No meetings or feedback.  An LBA was created and the board can choose to acquire additional debt without voter input.  They can add millions of dollars in debt to refurbish Clear Creek or renovate district offices without voter input.

While I do not think any of our board members or district personnel are going on a spending spree, it does raise concerns about giving the power of going millions of dollars into debt to 7 people instead of tens of thousands of voters. If the LBA decides to add Clear Creek or other projects, we could be paying millions of dollars over decades for projects that our children will not access and we never voted on.

Basically, we were in a pickle.  We needed the funds to rebuild Scera Park without worrying about losing our AAA rating.  I understand that.  I just wonder if we opened Pandora’s box.