NEWTON
Catawba County commissioners thought the means of funding school projects was in place until Finance Director Rodney Miller offered a potential money-saving alternative.
It's a federal program that pays state and local governments for a portion of interest payments on construction costs.
Commissioners have already approved a new Newton-Conover middle school and renovations at Arndt Middle School, Hickory High School and Catawba Valley Community College.
The board is prepared to spend up to $32 million for the work.
Monday night, commissioners examined ways to pay for the projects.
The county has been saving for school capital expenses, first setting aside 2 cents of the 53-cent property tax rate, and then adding another 2 cents over the past several years.
Commissioners, with Miller and the finance department doing the preparation, expected to use the money they set aside, lottery receipts, and Qualified School Construction Bonds.
The QSCBs are part of the America Recovery and Reinvestment Act. The purpose of those bonds is to sell them at zero interest. However, according to the county, transactions involving QSCBs in other counties have been financed at 2 percent interest.
County officials were prepared to try selling the bonds at zero interest that would have saved $4 million over the 15-year life of the loan.
The county also was ready to fund the rest of the expenses at 4 to 4.5 percent interest.
Monday, Miller told the commissioners about Build America Bonds.
"We would borrow against our credit rating, which is double-A," he said, "instead of using traditional collateral."
"The federal reimbursement could mean a less expensive loan."
According to the Internal Revenue Service, the Build America program "authorizes state and local governments to issue Build America Bonds as taxable bonds in 2009 and 2010 to finance any capital expenditures for which they otherwise could issue tax-exempt governmental bonds.
"State and local governments receive a direct federal subsidy payment for a portion of their borrowing costs on Build America Bonds equal to 35 percent of the total coupon interest paid to investors," the IRS Web site states.
Miller wants to plot all possible combinations of financing to produce the least cost to the county for the school projects.
Commissioners approved his request, giving him and County Manager Tom Lundy the authority to use Build America bonds if they prove to be a viable option.
Reassessing the means of funding the projects will not delay construction or renovation.
Whatever financing plan emerges must be approved by the Local Government Commission, a state agency that evaluates large expenditures by county and municipal governments to ensure affordability.
The Local Government Commission is expected to review Catawba County's plan on Aug. 3.
Miller will report to commissioners at their next meeting Aug. 2 as a precursor to presenting the strategy to the LGC.
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