Lindbergh to recoup purchase of Dressel in future bond issue

Sale of COPs will reimburse district reserves immediately.

By MIKE ANTHONY

A resolution that will allow Lindbergh Schools to recover the cost of purchasing Dressel School through a future no-tax-rate-increase bond issue recently was adopted by the Board of Education.

As first reported online by the Call, the district closed July 26 on the $1.94 million purchase of the Dressel School building, which sits on roughly 10 acres at 10255 Musick Road. The purchase of the Dressel School building will allow Lindbergh to address enrollment projections that show a districtwide increase of nearly 450 students by 2015.

Board members voted unanimously Aug. 9 to approve the reimbursement resolution, which sets into motion a “very sophisticated financial plan,” according to Chief Financial Officer Pat Lanane. The CFO attributed some initial confusion about the source of funds for the purchase of Dressel School to the complexity of the financial transaction.

The resolution states the district spent $1,944,996 for the purchase of Dressel by using “available funds on hand.”

As proposed, the district will reimburse itself in October through lease-purchase financing involving the sale of up to $2.4 million worth certificates of participation, or COPs. At some point in the future — four to six years from now — a no-tax-rate-increase bond issue will be placed before voters that will incorporate the COPs debt into the ballot measure.

“… We’re going to issue these certificates of participation, which are lease obligations technically, and so we’ll sell those,” Lanane told the Call. “We get all the money back right then … Within the next couple of months, anyway, we’ll have sold those.

“We’ll have our money back. It will be back in the reserves. And then what we have done is this: For the first five years, the lease payment is very low. It’s like $100,000 a year. So our goal eventually is to then take that whole debt and move it into a bond issue in the future whenever that happens — the next four, five or six years …”

During the Aug. 9 meeting, Lanane said of the resolution, “…. This is about cash management, particularly cash management of operating funds, which is what we spend every day looking at. The long-term planning is fine and that falls into debt service and all this, but this gets at directly how do you manage those operating funds? And we had the most opportune circumstance in being able to look ahead and actually take a giant step toward solving the future enrollment growth problems of this district through purchasing Dressel School …

“It’s solves a real future problem that is only getting a little bit more exacerbated every year — three classrooms a year. After a while, you’ve got to have some place to put kids, and while we’re in great shape right now, we know based on the demographics and the census of the Lindbergh School District, the likelihood of quite a dramatic continuation of this housing turnover is simply going to happen,” he continued.

“It is not a matter of if, it’s a matter of when and every year we’re seeing the beginning of that now and it will continue for the next probably 10 years. And so what a wonderful opportunity to be able to buy a property that was greatly reduced from its original asking price and greatly below appraisal — a great opportunity for the school district and the taxpayers to get 10 acres inside the Lindbergh School District.

“My goodness — I just, believe me, I’ve been looking for two years and it just doesn’t exist at a price that you can really even think about,” the chief financial officer said. “Anything else would be two, three, four, five times as much money. So what an opportunity. But that opportunity, of course, hits our operating fund.”

Hence the need for the resolution, Lanane said.

“… This resolution allows us to say at some future date — well, actually very soon — we’re going to reimburse ourselves, really pay ourselves back the money that we used to buy the school with.

“It will go back into our operating funds. It will be there for our cash-flow purposes. It will help us forestall and lessen any borrowing that might happen by $1.9 million. It will lessen that chance and that’s considerable,” he said. “So it does all that and in the future when we have an opportunity for a no-tax-increase bond levy we’ll be able then to … move that cost into — that lease, this allows lease, what’s called certificates of participation — to move that into that bond issue and so permanently transfer operating funds, get those back into your operating budget, and put the capital expense into capital.

“And so it accomplishes the task that you really want to do. You get immediate increase in reimbursement into your reserve funds, which is a really good — great — thing to be able to do, and then long term it sets up your plan to be able to move this into capital funding.”

While Lindbergh Schools uses a competitive bidding process for the sale of general obligation bonds in which all the firms have to submit their bids by a specific time and date, the district’s financial adviser, Joy Howard of WM Financial Strategies, told the board that selling COPs is more complicated.

“… The certificates are a little more complicated so we’re not doing that type of a competitive bid. We’ll do a competitive proposal, but it will be very close to a competitive bid …,” she said. “All we’re doing is giving them a little bit of wiggle room between the date they submit the proposal and the date they come to the board to do what’s called a presale. And that makes life a lot easier for underwriters in this type of an issue.

“Then we will come back before the board with all of the documents to be executed on Oct. 11 and you will have money in your hands and ready to reimburse your general fund on Oct. 19.”

The up to $2.4 million in COPs, which will be financed over 20 years, are expected to carry an interest rate of no more than 4 percent and likely less, Howard said.

By 2015, Lindbergh’s enrollment is expected to exceed 6,000 students for the first time in 30 years. The last time enrollment was 6,111 was in 1981-1982 and student population was declining. As a result, the school board voted to close Dressel, Fenton, Concord and Watson schools.

Selling Dressel has saved taxpayers more than $1 million since then in maintenance and operating costs, according to district officials, who have said that renovating Dressel will cost exponentially less than buying land at commercial rate and building a brand new facility.

Without additional space, the projected enrollment increase would cause Lindbergh’s class sizes to exceed Missouri maximum standards and threaten student achievement and test scores that are currently ranked No. 1 in the state.