With a controversial middle school project now on hold, the Carter County school system has come up with a plan to use previously allocated money to help pay off some of the county’s debt and save taxpayers money in the process.
As part of the 2014-15 fiscal year, members of the County Commission voted to allocate $800,000 to debt service for a one-time capital outlay note to fund architects’ fees for a proposed new middle school in the Stoney Creek community.
With the project now on hold, the money allocated by the commission has not been used and remains sitting in the county’s debt service fund.
“No official debt was ever approved for architect fees,” County Finance Director Ingrid Deloach said. “That money was put into debt service and once it’s there the only thing you can do with it is service debt.”
Deloach and Director of Schools Kevin Ward recently met with the school system’s financial advisor to discuss the handling of the system’s current debt.
The three worked together to develop a plan to pay off some of the school system’s debt early using the available funds in debt service.
During Thursday’s meeting of the Board of Education, Ward and Deloach presented the proposal to the board members for approval.
Currently the school system has three outstanding debt notes. Deloach said one is the second note on the Cloudland Elementary School project. The first of the two notes taken out for the Cloudland Elementary project was paid off during the 2013-2014 budget year, Deloach said.
The second note is for improvements at Unaka High School, Deloach said. The third note, which is the largest, is for improvements at Cloudland High School, several roofing projects across the school system and the purchase of several school buses.
Each year in May, the county makes its principal payment on those notes, Deloach said.
“You make one annual payment on those,” she said. “It’s not like a car payment or a house payment.”
When the payments are made for 2015, Deloach said the Cloudland Elementary note will have a principal balance of about $322,000 and the Unaka High note will have a balance of about $478,629, bringing the total balance of those two notes to about $800,629.
Ward told the board the proposal is to use the $800,000 allocated by the county to pay off the Cloudland Elementary and Unaka High School notes. Then, beginning with the 2015-2016 fiscal year, the county could use the money previously budgeted for those payments to pay on the Cloudland High note.
After the 2015 payment is made, Deloach said the remaining principal balance on the Cloudland High note will be $2,419,000. Currently, the Cloudland High note is due to be paid off in 14 years.
If the proposal goes through, Deloach said it could be paid off in as little as four years, resulting in 10 years worth of savings on interest for the county, which could add up to more than $1 million.
Because any new debt taken on by the county for the schools must be split between the county and city school systems $800,000 was earmarked to make sure the school system had enough money to cover the $550,000 in fees once the money was divided.
Deloach said under the current proposal, all of the $800,000 could remain with the county schools.
“The reason we don’t have to give the city their portion to pay off the debt is because they’ve already been paid their portion on those debts,” Deloach said. “That saves us the balance going to the city plus the large interest savings.”
Ward asked the board for permission to take the proposal to the county budget committee and then, on to the full County Commission.
“This is a no brainer,” board member Kelly Crain said. “Any time you can help yourself and help the taxpayer, it is a no brainer.”
The board voted unanimously to approve Ward taking the proposal to the budget committee, which is next scheduled to meet on Jan. 12 at 6 p.m.