The West Virginia School Building Authority's board approved Monday selling up to $48 million in bonds, which the SBA's finance director says are planned to be the agency's last taking on of bond debt to generate new revenue.
Finance Director Garry Stewart said that, following this bond sale, the agency intends to shift to a fully "pay-as-you-go" system that won't require taking on debt and will avoid the associated interest costs. He said the agency hasn't used a fully pay-as-you-go system since it was established in 1989.
He said the new bonds are meant to raise money for the "needs" grants for the public school construction and renovation projects the SBA board chose to fund in December. The SBA distributes about $50 million in "needs" funding each year to county school systems, which compete with one another to persuade SBA board members that their projects are deserving of the limited funding.
These new bonds to be sold aren't allowed to have annual interest rates above 6 percent. Ryan White — whose Charleston-based firm, White Law Offices, has worked as bond counsel on the sale — said he is expecting rates of less than 3 percent annually.
Stewart said he expects the total interest costs on the $48 million in principal will be about $7 million to $7.5 million. He said the debt will be paid down over a 15-year period.
White said the SBA is trying to get $45 million in bond proceeds, but said that sometimes requires selling more bonds than you actually get in proceeds, and there are also costs for issuance and other items, hence the "not to exceed $48 million."
"They'll probably be closer to $45 million," White said.
Stewart said the $48 million allowance provides the flexibility to possibly accept only $45 million in actual revenue, in exchange for lower interest rates.
Stewart said he expects that the SBA will, relatively soon, have about $50 million for needs projects provided annually through existing state law, without the need to take on more debt. He said that annual number is set to reach about $90 million annually 15 years from now, when this new bond debt is paid off.
The funding sources in the future will include excess lottery, regular lottery and other money. Much of that currently goes to paying off debt.
Stewart said the shift away from incurring debt was enabled by House Bill 2720, which lawmakers passed and Gov. Jim Justice signed into law last year, allowing older bonds to be paid off three years early. Stewart also credited legislation passed in the 1990s.
He said the past-debt payoff triggers $24 million to be provided annually, through state law, as "pay-as-you-go" funding, rather than its current use to pay down past debt. He said that will be combined with an existing $27 million from another source, also provided through state law, to ensure the total annual $50 million.
"This is [Gov. Earl Ray] Tomblin's plan, but agreed to by the Justice administration," Stewart said.
Because of impending table-game competition from other states, Stewart said he doubts "we'll ever bond off the excess lottery [revenue] again." He said regular lottery revenue, backed by scratch-off tickets, seems more secure.
