School district faces financial, legal questions on project
Leasing property to the YMCA could create financial problems for both the county and school system.
School board officials put the deal on hold Monday, Nov. 21, after hearing that county staff had legal and financial concerns about approving it. Board members attended the county commission meeting to ask commissioners to waive their rights to the 14 1/3 acres next to Cuthbertson Middle and High schools.
But the Cuthbertson school property was purchased with tax exempt bonds. While leasing the property is legal, the school district has to be careful how the YMCA pays for it, as too much cash could jeopardize the tax exempt status of the bonds.
“Unfortunately, the more you get back in value, the more likely you come to triggering the (tax exempt clause),” interim County Finance Officer Wes Baker said.
Charging a lower rent won’t solve the problem either, as state law requires the school district to get current fair market value in any rental or lease. So the question becomes how much money is acceptable and how much would have to be paid with services, such as building a new facility or a new athletic field. Baker said he doesn’t know.
“Without knowing how much the Y is willing to pay, it’s hard to say how much would be alright,” Baker said, explaining the boundary isn’t a set number but rather a percentage, that changes based on the amount of cash involved.
Any money paid as rent has to be used to pay off the debt. Board of Education chairman Dean Arp said the district had hoped to use the lease as a way to pay back some, if not all of the land cost. That property has seen a drop in value since 2006 however. In 2006, it sold for $80,000 an acre. Now the Board of Education estimates it at $36,996 per acre. If the YMCA doesn’t move in, the land parcels will sit there unused, Arp said, because long term projections don’t show a need for another building until 2019.
“We obtained land to build a cluster,” Arp said. “We don’t foresee needing that second elementary school site for some time.”
Instead of an elementary school, the YMCA hopes to build a 30,000 square feet athletics and aquatic facility.
Discussions haven’t focused on cost, with YMCA officials hesitant about committing until commissioners turn over the land. Because the land was purchased with taxpayer money through bonds, before any sale is finalized, the school district has to offer it to the county to buy back. School officials hoped commissioners would waive their right to the property, but county staff said they wanted to be certain the tax exempt status of the bonds wasn’t in danger.
“We would feel more comfortable if we saw the numbers of the deal,” county manager Cindy Coto said.
Speaking after the meeting, Arp said the district didn’t know of the county’s concerns or they wouldn’t have brought it for consideration until those were addressed.
“We’re gonna find out what they need and we hope to sit down to clear this up,” Arp said.
Questions of traffic
Increased traffic at the site is another concern. Currently, the school district has a traffic study done in 2006 and estimates based on that data. The problem is that area has significantly grown since 2006, with several new subdivisions going up around Cuthbertson. Arp said he felt the numbers were accurate.
“We did a traffic study (at the time) to make sure (the site) could sustain four schools,” Arp said. “We’re satisfied it can. Their peak time is our absolute low time, on Saturday mornings.”
Any further studies, Arp said, should be done by YMCA officials.
“The onus is on the YMCA to satisfy (the state) and the municipality,” Arp said.
YMCA officials did not comment by presstime if they planned to pay for another traffic study. With the school district withdrawing the request, there’s no timetable in place for commissioners to revist the issue.