The BOC (Board of Commissioners) met in a special session tonight (11.4.19) and approved two resolutions for interim financing to fund the first high school in Lakeland and refinance the existing loan on Lakeland Middle Preparatory School (LMPS).
Closing could come Dec. 2nd with funds available to the Lakeland School System (LSS) by the end of December.
Link to agenda: https://tn-lakeland.civicplus.com/ArchiveCenter/ViewFile/Item/885
Link to Livestream: https://livestream.com/lakeland/events/8882994/videos/198613884
Resolution #1 for up to $45 million was approved by four yes votes and an abstention by Mayor Mike Cunningham. The second resolution for up to $62 million was approved in a 5-0 vote.
The 55-minute meeting at City Hall was not without questions and comments by the Mayor, commissioners and residents. Although there was no public comment from the floor, the Mayor read two emails he received regarding the resolutions:
- The first from resident Dee Dee Tipler asked for the annual payment on the general obligation loan and if LSS takes control of the total amount, what happens to the interest on the funds.
- The second email question, from resident Heather Adams, questioned the $45 million to build a high school when initial numbers were $35 million and $40 million?
Lauren Lowe, managing director with PFM Financial Advisors LLC, presented a series of slides detailing the RFP (Request for Proposals) on the general obligation bonds interim financing. Also on hand to answer questions was Michael J. Bradshaw, Jr., bond counsel with Butler Snow LLP.
The interim financing is to be purchased by the United States Department of Agriculture, acting through the Rural Development (USDA) at the end of construction which is expected to be in 2022.
Ms. Lowe said the RFP, among other things, requested fee and interest rate information for a fixed-rate or variable rate financing up to $45 million. The RFP was distributed to 18 financing institutions with responses received by four. Several of the non-proposing financial institutions expressed concerns related to the USDA takeout.
Among the financial institutions responding to the RFP, she said PNC had the lowest cost. She noted that among the proposals, the fixed rate was lower than the variable rate. In her timeline to interim financing, she said if the resolutions were approved, the financing could be approved by the state Nov. 22nd with anticipated closing Dec. 2nd and money available to LSS by the end of 2019.
The Mayor questioned which banks had concerns; noted Lakeland taxpayers will be fully obligated for the debt, which will be in the school’s bank; expressed concern about accountability with LSS; and asked why the original $40 million was now $45 million.
City Attorney Will Patterson said there was discussion a few months ago about capitalizing the interest rate which would bring the amount to almost $44 million. With the interim interest and extra costs, the amount is close to $44 million, he said. He added the “not to exceed’ language was included to provide flexibility.
Commissioner Richard Gonzales, Jr. said he concurred with the Mayor. “The interest was not presented to us at the front.” He asked if reserves would be used for the interest.
Vice Mayor Josh Roman said if there was any misunderstanding, it was his fault. In round numbers he said the cost to build the high school was not to exceed $45 million and the cost to refinance LMPS was about $12.8 million. Combined, the total is about $58 million and not $62 million as mentioned in resolution #2. And, he said, the $45 million amount could be lower.
Mr. Patterson also mentioned the $700,000 for four years the Lakeland School Board (LSB) pledged to help with the high school financing. He said details on that money will be part of the MOU (Memorandum of Understanding) to be negotiated with LSB at the Nov. 14th BOC business meeting.
Commissioner Gonzales asked if the $62 million would include money for the New Canada Road and other City projects.
City Manager Shane Horn said money for public works projects in the City haven’t been bid yet. He said the public works projects were separated out of this round of USDA funds.
Commissioner Wesley Wright reminded commissioners that LMPS was built under budget and LSB has been good stewards of taxpayer money. Commissioner Gonzales asked Dr. Ted Horrell, LSS superintendent, “When will we see a budget?”
Vice Mayor Roman suggested there are so many variables, it wasn’t a fair question at this time.
In an earlier explanation of the funding, Mr. Horn said:
“There are two separate resolutions to satisfy the individual requirements of the Bond Anticipation Note (BAN) ($45 million) for Interim Financing during construction and USDA’s requirement for the overall project loan amount ($62 million).
“The resolution up to $45 million is for the high school construction and associated interest during construction. The resolution of up to $62 million is the total amount of the project including $15.8 million for the 2015 CON refinancing.
“We had to break these apart to satisfy individual requirements of USDA and the interim financing lender. We are still looking at an overall loan amount of up to $62 million for both the new high school and the refinancing of the 2015 CON as well when USDA takes over the note at the end of construction,” said Mr. Horn.
LSS operates Lakeland Elementary School and LMPS, serving grades K-8. Currently high school students attend Arlington High School through an interlocal between the two cities.
… Photos by Jim Willis, Lakeland Currents
