Building upgrades prompt funding need

Workers pour cement into a building base at the site of the future Castaic High School on Friday, June 16, 2017. Katharine Lotze/The Signal
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A funding need for planned building upgrades at various Hart district schools prompted leaders to pass a new bond not to exceed the amount of $24 million.

The resolution authorizing the issuance, sale and delivery of lease revenue bonds was approved on Wednesday by the William S. Hart Joint School Financing Authority, which is comprised of members in the William S. Hart Union High School District governing board.

During the district’s meeting of the governing board, district CFO Ralph Peschek said the purpose is to help school officials receive a large share of revenue allocated to the district by the state up-front, which would allow the district’s ongoing projects to start sooner and be completed in a timely manner.

“It’s a complex thing, but the most important thing to know is we’re not assessing any new taxes on the taxpayers of the community,” Peschek said. “We’ve done a great job of managing construction and modernization,” but due to rising construction costs in recent years, the district finds itself in a tough situation.

“The current revenue stream from our (Community Facilities Districts) CFDs is received on an annual basis,” Peschek added, but the resolution allows the board to find new revenue streams, so that the district will have enough money for the modernization upgrades that are needed. A CFD is a geographic area determined by officials to apportion property tax dollars to respective school districts.

Despite the district lacking a list of projects that details where the money will be spent, Hart’s financing authority approved the issuance of lease revenue bonds, which is a type of bond that usually finances the construction of facilities, according to the state’s Treasury Department. Lease revenue bonds do not require voter approval, whereas general obligation bonds, such as Measure SA, do.

Institutional investors and residents alike are free to purchase the bonds through the district’s broker, board members said.

The bonds are necessary because the state refuses to distribute the money that’s owed to the district through Proposition 51, which was passed in 2016 and promised to open up $9 billion for the state’s public education system for capital improvements, Peschek said.

Board member Joe Messina clarified that the newly approved bond funds allows the district to provide a “bridge” to cover the shortfall of $81 million that the state refuses to release to the Hart district.

“The district isn’t borrowing this money to start new projects,” Messina said. “The intent is to pay this back should the $81 million come flying in here.”

To pay for the bond, the district will make 24 annual payments ranging from $704,467 to $4.7 million and the primary source of repayment will be surplus tax revenues generated through the Community Facilities Districts, according to a letter from the Los Angeles County Office of Education. “The district’s analysis for the proposed financing and the method of repayment appears to be reasonable and repayment probable.”

Using West Ranch as collateral for the funds was troubling for a resident who spoke during the public comment portion of the meeting, but Peschek and the board didn’t share the concern.

“We don’t anticipate receiving this money for a couple more years,” Peschek added. “So, if we rely only on the CFDs revenue, then the district wouldn’t get the money in time to complete the projects.

“We are quite confident, as are our financial advisers, that this is a very secure and low-risk issuance,” Peschek said. “We have structured this so the excess tax revenue from the CFDs will be more than sufficient to satisfy the debt payments on this issuance.”

District officials were unworried about the likelihood of repayment in phone interviews Friday.

“We will take care of this,” Messina said before the resolution passed, “as soon as we can.”

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