How the school board plans to finance its $1.4 million building improvements fund
News Analysis
by Greg Rushford
At its most recent monthly meeting on Aug. 12, Rappahannock County’s school board approved a proposal calling for a $1.4 million capital improvement plan. Details of the actual construction projects for the county’s elementary school, the high school, and the school board’s administrative offices were reported by RappVoice on Aug. 13. Along with the physical breakdown of the various building improvements as previously detailed, there is also the important matter of how the project will be paid for.
School board member Wes Mills has asserted that the plan would not be using new tax dollars, and the spending would pay for itself. Superintendent of Schools Bob Chappell, the man who will be working out the details, insists that the proposed capital improvements will not cost taxpayers “one dime” in additional spending.
But a review of details of the proposal’s financing as they have been explained initially to the public suggests that the financing issue is complicated and not as clear-cut as the superintendent and the school board maintain. This doesn’t mean that the plan won’t eventually work out to be in the county’s taxpayers’ best interests in holding spending down. But before a conclusion can be drawn one way or another, complicated financing arrangements will have to be worked out.
There are three parts to the building-improvements plan, each of which has its own issues and questions that are related to financing.
First, there is the question of how a $285,600 part of the whole $1,425,526 package will be financed. The financing of this $285,600 is listed on a spreadsheet that Chappell presented to the school board on Aug. 12 as “TBA” — To Be Announced. No school board member asked about the implications of TBA, but it would seem to suggest that tax dollars will be used to pay for the construction.
The breakdown of the $285,600 is as follows: $100,000 to replace flooring in the high school that dates to the 1960s; $51,800 to pave the high school’s rear parking lot; and $125,000 to replace old flooring in the elementary school.
There is also a $7,800 proposal to install a new “Ice and Watershield membrane” around the perimeter of the elementary school roof, plus another $600 to re-wire the school’s smoke detectors “so that the fire alarm is not automatically activated when the power is shut off,” according to Chappell’s spreadsheet. Also planned is a $400 expenditure to install two new circuits in the school-bus garage.
The second part of the plan now suggests $4,116 to plant four maple trees and build a trellis aiming to lower the utility bills incurred by the school board’s administrative offices on Schoolhouse Road, which presently bake in the summer’s sun and freeze in the winter. Current plans are for the school board to seek a grant from the Jesse & Rose Loeb Foundation, which is based in Warrenton, Va.
The Loeb foundation’s website says that it has provided hundreds of thousands of dollars of support for charitable organizations “exclusively located in Fauquier County.” While on its face, that would seem to preclude approval of grants sought from Rappahannock County, the Loeb foundation has given a $5,000 grant for construction costs associated with the rehabilitation of Rappahannock County’s historic Scrabble School.
The Loeb foundation’s directors meet between Feb. and April each year, awarding grants in July, according to the Loeb website. The site further notes that it is looking for “persuasive and well-crafted” requests for financial assistance.
The remaining third leg of the $1.4 million package involves by far the most money: $1,135,810 in funding. This money would be aimed at achieving various energy efficiencies ranging from installing solar panels and more efficient thermostat controls, to removing asbestos in school halls and ceilings to make room for more energy-efficient lighting fixtures.
This is the main part of the package that school board officials and Chappell assert will not involve tax dollars. Whether those hopes will materialize will depend upon how the details of the financing will be worked out, when and if they will be approved by the county’s board of supervisors — which will be asked to borrow $1 million or more from a state agency and pay interest costs, while hoping to save future tax dollars on reduced energy bills.
Chappell outlined his plans in an August 11, 2008 memo to the school board. The superintendent reported that he has been meeting with Charlie Barksdale, an official with the Virginia Department of Mines, Minerals and Energy. Barksdale is in charge of helping the commonwealth’s school systems and other public entities obtain financing through “performance bonds.”
The driving idea is to borrow money to finance construction in a manner that won’t end up costing taxpayers any more than they have already been paying, and will continue to pay for the duration of the loan (estimates range from 12- to 20 years). In the parlance used by budget experts at all levels of government, the financing idea is aimed at “cost avoidance,” or “cost savings,” not “cost cutting,” at least not initially.
This parlance isn’t overly difficult to understand, but takes some explanation.
In his August 11 memo, Chappell explained that he will be meeting with at least three energy service companies, which will be selected from a list of nine state-approved private-sector contractors. The contractors will be asked to compete to get the performance contract. Such contractors are usually referred to as Escos (the acronym is sometimes capitalized).
Each of the three Escos — contractors — will be first asked to perform what Chappell’s memo referred to as a “back of the envelope” energy audit, the purpose of which will be to identify energy costs that can be “avoided” by providing building upgrades. The contractors would not send the county a bill for their initial proposals, which would be presented to the school board “possibly as early as January,” according to Chappell’s memo.
Next, the school board would be asked to decide whether it wants “to enter into a Performance Contract” with one of the Escos, the superintendent’s memo continues. If so, then the contractor “would do an in-depth energy audit,” which would be presented in March or April, 2009. “If the board decides to proceed to sign a Performance Contract with the ESCO, there is no charge for the in-depth energy audit,” the memo says. “If not, there is a charge for the in-depth energy audit,” the memo notes. At the Aug. 12 school board meeting, nobody asked what that charge might entail.
The next step would be for the school board to go to the county’s board of supervisors, which is the only authorized public body with the authority to tax or borrow money for the county’s schools. The supervisors would be asked “to consider financing a Performance Contract with an ESCO to do the energy upgrades.” Chappell’s memo further relates.
The school board plans to ask the county’s board to borrow the $1.1 million, or whatever the final figure turns out to be, from the Virginia Resources Authority. The VRA is a state agency that provides various low-interest loans aimed at achieving energy savings.
The VRA loans, for example, can be bundled with other loans and then floated as bonds to buyers ranging from large institutional investors like insurance companies to individuals looking for safe investments, according to commonwealth officials who are familiar with the process. The reasons such bonds are considered safe is that they are backed by the full faith and credit of the commonwealth of Virginia.
When Rappahannock County borrows money, of course, that money will have to be repaid. The hope is that each month during the term of the loan that the county (and its taxpayers) will be paying on, the schools’ utility bills will be reduced because those bills will go down when the energy efficiencies are built into the system. Instead of paying the utility company, the county would pay the loan.
Here is where the parlance about “cost savings” and “cost avoidance” enters the picture. If the county’s current utility bill is, say $10, explains County Administrator John McCarthy, that bill could drop to $8 thanks to the energy efficiencies achieved. So if the debt service on the loan is $2, the county is lowering it’s utility bills “with no increase in cost.” Later on, the hope is that the utility bills will drop even further, thus achieving real savings.
Chappell has further told the school board that if the savings do not turn out as hoped for, the Esco private contractor will write a check to the county paying the difference. That’s why Chappell and school board members claim that the financing will turn out not to cost taxpayers to fork out even “one dime.”
McCarthy and commonwealth officials say that the process that the school board has approved has effectively lowered public bodies’ utility bills elsewhere in Virginia. Of course, for Rappahannock County’s current plans, much will depend upon how the proverbial devilish details are worked out. To cite one potential red flag, the current economy is now facing higher energy bills that have resulted from skyrocketing global oil prices. So it is conceivable that utility bills will still keep on rising, no matter what efficiencies can be achieved.
-- GregRushfordComments
Comment from AmySilverOLeary
Time: August 18, 2008, 9:01 am
Rappahannock County Public Schools have received grants from the Loeb Foundation in five of the last six years. It’s reasonable to expect we could receive one for the maple trees and the trellis.
Amy Silver O’Leary, Headwaters
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