Board mulling financing to close AMS

Published 12:03 am Wednesday, September 28, 2011

The Andalusia Board of Education is weighing whether to capitalize on low interests rates in order to move along on their plan to close Anda-lusia Middle School.

The board anno-unced a capital plan in July that would close the school.

The plan will send sixth graders to the Andalusia Elementary School, and seventh and eighth graders to Andalusia High School.

Ken Funderburck and John Ashworth of Merchants Capital, a Montgomery-based, privately held bond firm, presented board members with four different scenarios on Tuesday that would allow the system to “borrow” between $5 million and $6 million in capitalized interest without raising the system’s debt picture. The money could be used to build the additional space needed at the high school and the elementary school to house middle school students.

“What you’re doing is borrowing the interest for the new debt piece until 2014,” Funderburck said. “It’s very inexpensive to capitalize interest until the old debt rolls away.”

Funderburck told board members if they waited until 2014, the picture wouldn’t look better.

“It will cost you,” he said. “If you waited until 2014, you wouldn’t have the new project in place and you would pay more for it in terms of financing and construction costs.”

If the bonds are amortized for 30 years, then the payment would be roughly $360,000 per year. Currently the system pays $479,000 per year on the debt service for the AES project.

The payment would increase to roughly $395,000 for a 25-year amortization.

If the system borrowed $5 million in capitalized interest that had a 20-year amortization, it would cost roughly $449,000 a year.

Ashworth also calculated roughly how much money the system could borrow based on the $479,000 a year it currently pays.

Based on that annual payment, the system could borrow roughly $6 million.

Funderburck said the debt could be supported by the city.

Mayor Earl Johnson told board members that if they choose to go through with the proposal, the city would commit 2.5 mills, which can only be earmarked for capital payments, to the bond issue.

Johnson said 2.5 mills means roughly $250,000.

The city is also working to take advantage of the unusually low interest rates, and Funderburck said the school system could piggyback off the city, which would create a bigger deal and smaller fees.

The board requested two weeks to mull over the numbers, and Superintendent Ted Watson requested the board’s permission to seek input from architects to see how much the project could cost.

“The ball is certainly picking up speed (for this project),” Watson said. “I think we need to get a grasp of what we are looking at as far as money. I want to get an architect’s thoughts about what they think it will cost.”

Board members asked Watson to have the information ready by the next board meeting in order for them to make “an intelligent decision.”

The board will meet Oct. 10, at 6 p.m. at the Central Office.