Clark County Debt Management commissioners gave a conditional thumbs-up to a new $249 million bond program for local public schools Friday, delaying approval on $145 million of the bonds because they were skeptical about school officials' predictions for an economic recovery in real estate and tourism.
School officials did not object because they got approval to pursue a federal stimulus program incentive, which would allow them to issue $104 million in interest-free bonds.
Real estate transfer taxes and room taxes would finance the proposed "interim" bond program, which would maintain school buildings and infrastructure until the voters approved a much larger bond program like the $4.9 billion program passed in 1998.
Clark County School District officials predict revenues will return to 2008 levels by 2012, producing about $107 million annually for debt service payments through 2032.
County Commissioner Steve Sisolak and Carole Vilardo of the Nevada Taxpayers Association, who are both members of the Debt Commission, questioned how "conservative" their projections were and wondered whether the school officials were leaving themselves with "little wiggle room" if the economic recovery is slower than expected.
The school district, however, keeps capital reserves of $500 million for debt payments. It has maintained double AA bond ratings with ratings firms such as Fitch and Standard and Poor's.
In an interview, district officials responded that their projections were conservative because they went with 2008 numbers and did not factor in the impact of new Strip resorts like Encore and City Center, which MGM/Mirage has called the largest private construction project in U.S. history.
To allow the school district to make a deadline for a federal stimulus program, the Debt Commission decided to allow it to offer $51.4 million in interest-free bonds by December and another $52.6 million in interest-free bonds by June 2010.
Buyers of the bonds would be eligible for tax credits from the federal government as part of the federal stimulus, saving the district "millions" of dollars in interest, school officials said.
The Debt Commission told school district officials to wait on issuing an additional $145 million in traditional, interest-bearing bonds until at least next year when the commission should have a better idea of how the economic recovery is faring.
The school district isn't planning on issuing the $145 million in traditional bonds until 2011 anyway, according to a school district timeline. School officials also said they would reduce their bond sale amounts if their assumptions are off.
The Debt Commission approved the schools bond request in a 10-0 vote after County Commissioner Tom Collins made an impassioned appeal on behalf of public education.
"If you want a bunch of dumb-ass kids growing up washing dishes and sweeping streets and not being able to go on to college and perform, then don't approve nothing," he said.
Boulder City Councilman Cam Walker, also a member of the Debt Commission, abstained from the vote because he works for a construction company that could benefit from the bond program, which is to go toward renovation and modernization of older schools.
Two public speakers, Kevinn Donovan and Ken Small, questioned the need for a bond program and the judgment of the school district's facilities department.
Donovan said the schools now have the capacity for 374,000 students but only have about 310,000.
Vilardo, a debt commissioner, said commissioners are prohibited by statute from considering the worthiness of the project. She said they are only concerned with debt issues.
The proposed bond program, which still must be approved by the School Board before it can go forward, would not affect property taxes.
The room and real estate transfer taxes would pay off the debt from the $249 million bond program as well as continue to pay down debt from the $4.9 billion bond approved by the voters in 1998.
Jeff Weiler, the chief financial officer for the school district, said an interim bond program is needed since the 1998 bond program is in its last stages.
The district has spent $4.3 billion of the $4.9 billion from the 1998 bond program. The remaining $550 million has already been obligated to projects and land purchases
By the time it is finished in 2010, the 1998 bond program will have paid for 101 new schools and 11 replacement schools.
The district's buildings and property are valued at more than $5 billion. To maintain this infrastructure, school officials said they need annual investments of $200 million to $300 million for regular upgrades like new roofs, air conditioners and other equipment.
School officials are updating a list of interim bond projects, which will be presented to both the district's Bond Oversight Committee and School Board. Other than the classrooms for West Prep, school officials said they have not gotten request for new projects.
Contact reporter James Haug at email@example.com or 702-374-7917.