CHICAGO — Nearly nine months after a devastating tornado wrecked its high school and destroyed or damaged nine other facilities, the Joplin School District in Missouri voted this week to ask voters for $62 million of borrowing authority to cover its share of a $185 million rebuilding program.
The school board voted on Monday to put the bond authorization before voters on the April ballot. A four-sevenths majority, or 57.14%, is needed for approval. The district provides K-12 education across a 70-mile area in southwestern part of the state, with 61,000 residents in the city of Joplin and several neighboring communities.
If voters pass the measure, total borrowing and the timing depend on numbers that are still in flux, including final state and federal contributions, insurance and donations, said the district’s chief financial officer, Paul Barr.
“We have pending state and federal grant requests and other revenue streams that are not final. If the grants come through we may modify our bond issuance,” Barr said.
The district, formally known as Jaspar County R-VIII School District, lost four of its 19 buildings. and another six were damaged by the category F-5 tornado that ripped through on May 22. Total district damages are estimated at over $150 million.
The tornado killed 161 and left 1,000 injured. In addition to the district’s damage, more than 8,000 homes and businesses were destroyed, along with St. John’s Regional Medical Center. It was one of the deadliest tornados on record.
As the district crafted its rebuilding program, dubbed Operation Rising Eagle, in recent months, it also decided to undertake other building projects on the drawing board that were unrelated to the damage.
“We had some projects we wanted to do and since we were going to have to go to voters because of the tornado damage, we thought the time was right to combine them all,” Barr said.
The $185 million building program includes 77 individual projects, including a new $104 million high school and Franklin Technology Center with a community safe room. Insurance will cover half of the high school’s cost, with federal and state funding providing an estimated $10.5 million and the district picking up $38.7 million.
A new middle school carries a $27 million price tag while two new elementary schools carry costs totaling $32 million. Another $15 million will cover the construction of safe rooms at district buildings and $7 million will go towards elementary repairs and improvements.
The district anticipates insurance will cover $85.9 million of the proposed capital program, with preliminary estimates of $35.4 million coming from state and federal sources, and $1.7 million in donations. Federal funds cover 75% of qualified projects, but not all expenses, such as planned improvements to the rebuilt schools, are covered. The state will kick in 10% to cover the local share.
The district’s focus on rebuilding came only after it worked over the summer to ensure its 2011-12 school year started on time on Aug. 17. By combining some schools and setting up temporary classes in such sites as an empty school, a warehouse, and space in a shopping mall, classes opened their doors as scheduled. More than 3,200 students, 44% of enrollment, are located in temporary classrooms.
“We won’t consider ourselves whole again until all of our staff and students are back in permanent facilities. We are working hard and moving full speed ahead to accomplish this task,” the district, led by superintendant C.J. Huff, says on its website. The goal is to break ground in May, with the elementary and middle schools ready for students in December 2013 and the high school in August 2014.
Costs are also contributing to the district’s sense of urgency, as temporary facilities carry a $40 million price tag over a three-year period, with the district responsible for about $6 million.
“Bottom line — we cannot afford to stay in temporary facilities any longer than absolutely necessary,” the district says. If voters reject the borrowing, the district would revise its building program, officials said.
The district has held on to its A-plus underlying issuer rating from Standard & Poor’s despite the strain the tornado has put on its finances. The district had healthy ending balance levels at the time of the tornado and was able to tap them to manage cash flow as it awaited aid and insurance reimbursement.
“We had good balances,” Barr said. “If we did not have that, we’d be in a different position.”
While the district will face a drop in assessed value over the next couple of years, there is a rebuilding boom across the city and Jaspar County. “We can see our way clear with the district being on firm financial footing” with the insurance as well as state and federal aid coming in and rebuilding, according to Barr.
Standard & Poor’s said district reserves were a positive factor in an October report affirming the credit, but analysts raised some concern that ongoing cleanup and rebuilding challenges could strain the district.
After budgeting for the cost of temporary school buildings, and possible reductions in state and local revenues, the district projected tapping about $4.8 million from reserves in fiscal 2012 to cover expenses.
“We believe that what we consider the district’s historically strong reserves could be challenged as it faces cleanup, repair and reconstruction costs in conjunction with uncertain property-tax collections and enrollment-based state aid revenue,” analysts wrote.
The district closed out fiscal 2011 with a small general fund surplus that bolstered its existing reserves to $13.3 million, or about 20% of its budgeted expenditures. The district also maintained a $4.2 million reserve for debt service and $6.4 million in a capital projects fund.
The district has a stable outlook on its underlying A-plus from S&P. It has an issuer credit rating because it borrows through the Missouri Direct Deposit of State Aid program. That boosts its $68 million of outstanding debt to the AA-plus level.
The underlying rating is supported by the district’s diverse local economy that serves as a regional retail center, strong wealth and adequate income levels, strong general fund reserves and low direct debt levels.
Enrollment was 7,800 in the last school year. While enrollment took a hit this year as some residents relocated, it’s on the rise and is about 7,400 for the current school year. Future enrollment is hard to determine amid ongoing residential rebuilding plans. The most recent assessed value was at $861 million, down by 3.3% from the $890 million recorded in fiscal 2010.
Estimates show the value could drop another 4% to $825 million in fiscal 2012.
“Although property taxes and state revenue might demonstrate near-term volatility, we believe officials, along with federal and state assistance, will likely make the necessary budget adjustments to maintain at least, in our opinion, adequate general fund reserves as they provide educational services, coupled with rebuilding and reconstruction efforts,” S&P said.
The district would use George K. Baum & Co. as its underwriter. It selected the firm through a competitive selection process.