Nevada County Picayune and Gurdon Times Newspaper Archive

Nevada examines restructuring its debt

A thick fog outside had nothing on the density of conversation going on with the Nevada School Board.

The board, at its regular monthly meeting, Thursday, Feb. 27, discussed restructuring the district's debt so as to have the 25 mill required for maintenance and operation (M&O) under Amendment 74.

The amendment stated districts must have 25 mill for M&O. However, districts across the state were allowed to use debt service mills toward this. When the Arkansas Supreme Court ruled on the Lake View case in November, 2002, it stated this was not the intent of the amendment.

The court then mandated all districts have 25 mill for M&O in their budgets, aside from any debt service mills.

While Nevada has 34.8 mill, 25.8 are for debt service, with 9 being for M&O. This means the district needs 16 mill to comply with the court order.

Nevada Superintendent Rick McAfee said change is inevitable, but doubts the education issue will be settled during the regular session of the General Assembly. "I think there will be a special session in August or September to finalize the plans."

Should the legislature wait this long to let districts know what to expect, he said, it shrinks the time line for districts being able to meet the requirements, especially in meeting those of Amendment 74.

There has been talk, he said, of districts being required to offer 60.5 credits. Nevada currently offers 58, including two foreign languages and five vocational programs.

However, he added, there has been talk in Little Rock of districts having to pay teachers $40,000 a year.

For Nevada to offer the other credits, McAfee said, the district would have to hire four more teachers and raise taxes 10 mill to be able to pay them.

Carey Smith, with Stephens, Inc., spoke to the board on its restructuring options. He presented four.

The first option is to ask residents of the district to raise taxes by 16 mill. This, he said, is not the best option.

Option two would transfer 16 mill from debt service to M&O, without raising taxes, or bringing in additional money.

McAfee said if the district went this route, the 9 mill wouldn't bring in enough money to make the annual payments on the building.

"We're in a negative cash flow situation now," he said. "If we went with option two, we couldn't meet our bond payments, and with the cuts, we couldn't meet our obligations."

There will be an $81,000 per year cut, he said, and the district doesn't have the money to give teachers pay raises under the plan without restructuring the debt.

The third possibility, Smith said, would be to extend the debt payoff. As it stands, Nevada looks to have its buildings paid off by 2006.

The fourth option would be to restructure the debt, transferring 16 mill to M&O and extending the debt to free up some funds.

Smith provided the board with a chart showing different payoff dates, how much the estimated annual payments would be and the difference between the current and proposed payments.

Currently, Nevada pays an annual bond payment of about $253,000 with the 2006 payoff from the 1992 bond issue.

Should the district opt to extend its debt to 2021, its annual payment would be $83,850, which would leave $169,150 for other needs.

Board members Mack Bridges and Don Callicott were opposed to the idea of extending the bond payoff past 2006, saying this would be passing the debt to the district's children.

"I want to get it paid off as soon as possible," Callicott said.

McAfee said with the cuts being proposed by the ADE, and cuts made in the past year, it has been hard for the district to try and maintain services and attempt to increase salaries.

The district, he said, has suffered $300,000 in cuts during the last three years, with more possible.

Currently, he said, the district is spending $220,000 a money in salaries.

Smith provided the board with a time line for a special election. He said it would be best to get the election out of the way as soon as possible to get the best bond rates.

He also informed the board, just because the indebtedness payoff is extended, doesn't mean the district can't pay it off early. "It's just like a bank loan."

The board will hold a special meeting to decide which option it wants to try, and a second meeting to pass the required resolutions to have an election.

No matter which way the board goes, patrons won't be asked to pay any more taxes  unless the measure is voted down.

Should the issue fail, the Nevada County Quorum Court would be required, under the ASC mandate, to raise the district's taxes by 16 mill to the required 25 M&O. Residents of the district would have no say in the matter if it goes to the court's hands.

In other business, Jim Cross, transportation director, said drivers managed to make it through the ice and slush, with Nevada only missing one day of school.

McAfee said Cross was out at 4:30 a.m. each morning checking the roads, especially the known bad places.