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|School board to borrow $10 million|
The Ouachita Parish School Board agreed to borrow $10 million at zero interest through a federal stimulus package for construction projects at western Ouachita schools.
Action was taken Tuesday during the school board's regular meeting.
Money borrowed from the government at no interest must be used for shovel-ready construction projects, according to Jason Akers of the law firm Foley and Judell of New Orleans. Foley and Judell represents Ouachita Parish Schools on most matters involving bond sales and other related issues.
Akers told school board members the money it will borrow can be used for capital improvement projects only, such as construction, renovations and major repairs.
"These are tax-credit bonds," Akers said. "It's quite different than anything else that's come down from Congress, who authorizes all tax exempt bonds. The holder of the bonds actually gets a tax credit that's set by the federal Treasury Department, and it's a credit throughout the life of the bonds. In this case, 15 years."
The school board would make a small principal payment at .06 percent annually to retire the debt incurred by the zero-interest loan. Typically, payment on a 15-year, tax-exempt bond is around 4.5 percent, Akers said.
He said the school board's annual principal payments would be placed in a sinking fund, which would accrue interest over the life of the bonds. That means the school board wouldn't have to pay back the entire $10 million it borrowed.
"While we can't tell you what the rate of return on that sinking fund will be, we can estimate, and if it's about 3 percent, that means you are only going to pay back $7.9 million of the $10 million you actually borrow," Akers said. "The additional $2.1 million is made up of the interest earnings in that account."
"It allows you to take a number of projects you otherwise wouldn't be able to do - or would have been paying up front - and pay for them over an extended period of time," Akers added.
He said a problem with the federal program is finding purchasers for the bonds.
"Purchasers have been few and far between," he said.
Community Trust Bank offered to purchase the bonds at the .06 percent interest rate.
"That is a very good offer, and they're going to be committed with you for the next 15 years," he said.
School board business manager Richie Garrett said CTB "really stepped forward and did us a big favor because many banks wouldn't even talk to us about this."
The school board would have three years to spend the money it borrows, Akers said.
The reason the money will be strictly used for western Ouachita Parish schools is because the school board will use the west-side sales tax to pay back the bonds, board member Scott Robinson said.
Superintendent Dr. Bob Webber says there are some immediate needs and necessary projects at several schools in western Ouachita Parish, which the school board needed to tackle anyway.