School Board Takes On $1 million Debt

Repairs to elementary building involve vacating the school next month

The Orcas Island School District Board of Directors decided, with Director Jim Sullivan dissenting, to approve a $1,000,000 loan from Cashmere Bank, in order to match a Department of Commerce grant to repair the Orcas elementary school building.

The energy refitting project is bid at $1.7 million, with the price, work and savings guaranteed by University Mechanical’s Energy Saving Performance Contractors Program,  a contracting oversight organization affiliated with the state Dept. of Commerce.

The work is scheduled to begin as soon as classes are dismissed mid-June. Teachers have been notified that they are to clear everything from their classrooms in preparation for the overhaul of the buildings plumbing, heating and other energy systems.

At the school board meeting last Thursday, the board discussed the merits of  two bond proposals; one from Capital One, a state-backed program with low interest (1.95 percent above the tax credit rate) and deferred payments; the other from Cashmere Bank, with a 10-year term and interest rate of 4.99 percent.

While the lower interest rate seemed more attractive at first reading, the board focused on the savings that might be realized if the loan amount is paid back early, and decided upon the Cashmere Bank loan.

The 15-year Capital One loan would only charge for interest in the first two years, it would not allow early payoff before year 10 of the 15 year loan.

In contrast, the Cashmere Bank load repayments would start Dec. 2011 for $65,000, but the full amounts is pre-payable at any time.

The school board reasoned that the $1,000,000 loan could be fully repaid within five years.

Board Director Tony Ghazell said, “While it’s attractive to have a lower yearly payment, there’s a catch that if we go out to public and pass a capital levy, we would be losing interest payments on the Cashmere loan.

“In the long run, assuming the public passes a capital levy, the interest amount would be less on the Cashmere loan than on the Capital One loan, but the risk is if the public doesn’t pass [a levy] in five years.”

Chris Sutton pursued the point saying, “If we put a $1 million levy before voters in November, we’ll have enough money to cover the Cashmere payments in a couple of years.”

Scott Lancaster said, “I’m way more inclined to go with Cashmere [loan].”

Sutton then moved to prepare documents for the $1 million from Cashmere Bank.

The motion passed, with Board Member Jim Sullivan voting against the loan.

Scott Lancaster said that he would like the board make some statement about their intention “to pay this off as soon as we have the funds without drawing this thing out. His suggestion that a resolution be prepared stating that it is the board’s intent is to ask the voters in a capital levy in one or two years to pay it back, and to pay it back as soon as the funds are available.

The board also accepted a contracted offer from April and Clyde Duke of Duke Contracting Services “to maintain the roofs of all Orcas Island school buildings  for three years”  at no cost to the district.

OISD Board President Janet Brownell said that Duke’s offer was “wonderfully generous.”

The offer stipulated that “the board will establish a structured maintenance program that ensures maintenance stability into the future,” and Duke said he would “be happy to assist in the process.”