School Board Accepts $900,000 and Moves Forward on Non-voted Debt

Board takes risk that community will support decision in public vote

Last night at a Special School Board meeting, the Orcas Island School District (OISD) Board of Directors voted 4 to 1 (with Director Jim Sullivan opposed) to direct district administration to prepare required documents for non-voted debt in the amount of $1,000,000 with separate documentation for two options. The first option is a loan with Capital One and is structured more like a standard loan. Prepayment could come after 10 years. The second option is “the Cashmere Bank loan” which does allow for earlier prepayment.

OISD Director Tony Ghazel, participating by videoconferencing, described the reasoning behind his vote at some length, and other directors agreed with many of Ghazel’s reservations. Before casting his vote for approval, Ghazel emphasized that the board acknowledge that “if we fail at a capital levy [voter approval to take on the $1,000,000 debt], the board’s consensus is that school programs will be cut.”

Ghazel then said “This is a project we as a board have voted to go forward with. We have listened to the public. We gain credibility by going forward.”

Sullivan said that he could not, “on principle,” approve of taking on the non-voted debt without consulting “the citizens who are our partners and our bosses.”  Sullivan also expressed concerns about the amount of interest debt that would be incurred in requesting up to $1,000,000. OISD Business Manager Keith Whitaker and Director Chris Sutton clarified that the interest amount for a 15-year debt would be $186,217.

Director Scott Lancaster explored the options of making interest-only payments for two years. Lancaster also provided a succinct timeline for the reasons why the board needed to obligate the district to non-voted debt:

• Washington State Office of Superintendent of Public Instruction(OSPI)  awarded OISD $460,000 last fall to make repairs to the elementary school (the grant required the district to match the $460,000 3 to 1);
• The  District board accepted the grant and committed $300,00 to University Mechanical’s Energy Saving Performance Contractors Program, which guarantees the cost of the project, the energy savings (estimated to be about $13,000 per year for the elementary school) and the performance of the contract;
• the State Department of Commerce grant of $900,000 for the elementary school repairs was awarded to the district this winter; it was originally thought that this grant could serve as a partial match to the OSPI grant
• The OISD was informed that it could not use the Commerce grant as a match for the OSPI grant, and further, that they could not accept both grants
• The OISD declined the $460,000 grant from the OSPI at its March 31 board meeting
• There is not time to go out to the voters before the deadline on accepting the Commerce grant of $900,000

Lancaster than said “By saying, ‘stop now,’ and then asking the community for $2,000,000 to complete this project in the future, we’re affecting the finances of the district.”

Lancaster also said, “We are charged to maintain the campus…. I am concerned for the children that are in there now. The fact that we have five years’ payment and that Clyde’s group  [a community group of contractors organized by Clyde Duke to advise the district] has come forward makes this a pretty easy decision for me.”

Director Chris Sutton said, “At the last meeting, I was uncomfortable [taking on non-voted debt] without the community response. What I’ve heard since then is, by taking this risk … the community will help pay it back.

OISD President Janet Brownell said, “We’re going into this with our eyes open and with some fear,” and supported moving forward to consider the two non-voted debt options.

Whitaker encouraged the board to take on $1,000,000 amount of debt for two reasons:
1)    unknown developments as the scope of work (which is guaranteed by the state Department of Commerce grant to cost a total of $1.75 million) is fulfilled may require less funds to address  at the time they are discovered than to “patch up” and return to repair at a later date;
2)    the additional funds may be used to address the impact on district personnel to manage  the construction project.
“The worst that can happen [by asking for an amount above the exact amount to match the $900,000 grant] is the funds will go into the Capital Projects Fund, which we’ve been spending this year on emergency repairs,” Whitaker said.